In August 2013, the Ministry of Corporate Affairs published the Companies Act, 2013, consolidating and amending the laws relating to companies. The new Act contained a minor amendment requiring companies to disclose the names of political parties that received contributions from them. And thanks to a controversial letter issued recently from the Confederation of Indian Industry (CII) that reportedly sought to make this disclosure voluntary, at least a handful of newspaper articles discussed the new norms
“Such a clause will put us in a discomfiting position vis à vis political parties,” an unnamed executive is reported to have told The Economic Times. The reason, according to the ET article, is that “industry is apprehensive that full disclosure of political funding beneficiaries, as required under the new Companies Act, may lead to backlash from political parties that feel relatively less-generously funded.”
If anything, the happenings of the last decade, replete as they have been with multi-lakh crore scams, ought to have created the political climate for a total ban on corporate contributions to political parties. Instead, what we see is a meek tweak of the law requiring disclosure of political beneficiaries. For a country grappling with the largest experiment in democracy, debate on the role of corporations in the democratic sphere has been sparse and pathetically shallow. The media discussions in the wake of the recent amendment don’t even question whether money given by corporations can be considered as “contributions”, leave alone explore the extent to which moneyed interests have encroached into our democratic spaces.
The phrase “corporate contributions” is a euphemism that seeks to hide vested interests behind the benevolent cloak of charity, donation and philanthropy. The objectives of such contributions have more to do with furthering business interests than the donor’s love for democracy or for this or that political party. Funding the party in power, betting on the winning horse or likely winners before the election, is an investment.
In a telling article on the subject, Frontline correspondent V Venkatesan wrote: “The objectives of corporate funding of political parties underwent a transformation following the policy of liberalization...The emphasis has clearly shifted from seeking favors from the government for securing licenses, permits and quotas, to seeking protection from the entry of multinational corporations. Emboldened by the perceived ‘irreversibility’ of the economic reform process, which largely unshackled it from a regime of controls and permits, organized industry has been sending signals to the parties that its voice would have to be heard.”
Since the birth of corporations, people have warned that the irrepressible corporate voice could eventually drown out the voices of the people, that corporate interest would eventually come to be equated with national interest. At the peak of the Tata controversy in Singur, West Bengal, Anand Giridharadhas began an article in the New York Times with the lead: “This country’sproject to build the world’s cheapest car has driven into a quintessentially Indian ditch” (emphasis added). The portrayal of peasants reluctant to part with their land and the consequent political battles as the ‘quintessential Indian ditch’ is worth noting. But the startling part is the manner in which Tata Motors’ entirely commercial venture of producing a small car has been portrayed as ‘this country’s’ national project.
The most unlikely and famous among soothsayers of this corporate hijacking was the US president Abraham Lincoln. In a letter dated November 21, 1864, Lincoln – formerly a lawyer for American railroad corporations – wrote: “I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.”
The first avatar of the Companies Act in India – the 1913 version – had no provision relating to corporate donations. Neither did it have any provision expressly barring such actions. The Companies Act, 1956, however, did contain Section 293 that allowed companies to contribute funds to charitable and other purposes. In 1958, the then-Chief Justice of the Bombay High Court Justice M C Chagla delivered a revealing verdict in Jayantilal Ranchhoddas Koticha ... vs Tata Iron And Steel Co. Ltd (TISCO). The case dealt with TISCO’s request for the court’s endorsement of an amendment of their Memorandum of Association to allow them to contribute to political party funds. The judgement is worth reading in its entirety.
To bolster its case, TISCO pointed out that nine other recently created companies had objects in their memoranda that permitted them to contribute to political parties. TISCO’s lawyer argued – and Justice Chagla accepted – that “in the competition which is an inevitable feature of trade and commerce, these companies which can subscribe to political funds of the Congress would be in a better position vis-a-vis the Congress Government than the Tata Iron and Steel Company if it is not permitted to contribute to funds of the Congress.”
TISCO’s amendment was approved, but Justice Chagla pulled no punches when it came to warning of the consequences of unfettered corporate funding: “History of democracy has proved that in other countries, democracy has been smothered by big business and money bags playing an important part in the working of democratic institutions and it is the duty not only of politicians, not only of citizens, but even of a Court of law, to the extent that it has got the power, to prevent any influence being exercised upon the voter which is an improper influence or which may be looked at from any point of view as a corrupt influence. The very basis of democracy is the voter and... and it may be said that it is difficult to accept the position that the integrity of the voter and of the representative is safeguarded if large industrial concerns are permitted to contribute to political funds to bring about a particular result.”
A similarly prescient Calcutta High Court warned that corporate entry into such democratic spaces “will mark the advent and entry of the voice of the big business in polities and in the political life of the country.”
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Now, more than half a century later, it would not be an exaggeration to state that Big Business is entrenched in all our vital democratic spaces. Laws are enacted, others changed, and some gutted in response to corporate pressure. Unlike pressure from civil society, where people starve to prove a point, corporations get their work done by treating the people that matter to 5-star dinners at organized roundtables and conferences.
In 2008, I was sitting in solidarity at Jantar Mantar with more than 60 Bhopal gas tragedy survivors. Most of them, including several who were ailing due to gas exposure, had walked 800 km from Bhopal to New Delhi to meet Prime Minister Manmohan Singh. This was the second march for the survivors; they had met the prime minister two years ago after a prolonged hunger strike. They had returned in 2008 because Dr Singh had reneged on all the commitments he had made earlier.
We arrived in New Delhi in late February and pitched our pandal on a Jantar Mantar sidewalk. Here, we remained – the elderly, children, men and women – through the Delhi summer, the pre-monsoon dust storms and the rains. Our prime minister did not refuse to meet us. He just ignored us. Around the same time, Samajwadi Party leader Amar Singh was raising a stink about levy of windfall profit tax on Mukesh Ambani’s Reliance Industries Limited (RIL)_ and seeking the intervention of the prime minister in resolving the tiff between the sparring Ambani brothers. On July 14 – four and a half months since the Bhopal survivors arrived in Delhi – an irate Mukesh flew in to Delhi in his private jet and met the prime minister. The afternoon news told us that Ambani would meet Principal Secretary TKA Nair at 4pm, Petroleum Minister Murli Deora at 5pm and Sonia Gandhi at 7pm before flying home.
The Bhopalis never got to meet the Prime Minister that year. Today, December 4th, marks the beginning of the 30th year since the Bhopal disaster.
2008 was the year that Bhopalis began releasing extracts from the “PMO files” – a dossier of painstakingly collated information unearthed through Right to Information inspections of files held by the PMO on the Bhopal tragedy. The files revealed how Dow Chemical CEO Andrew Liveris had met Dr Singh in New York, and subsequently roped in Ratan Tata, Finance Minister P Chidambaram, Congress spokesperson Abhishek Manu Singhvi and Indian ambassador to the US Ronen Sen to lobby on Dow’s behalf.
For all the talk about transparency and participation in governance, it would be safe to say that these are the two things that bureaucrats and politicians find petrifying. The industry’s take on transparency and participation is curious. So, while CII has objected to the mandatory disclosure of political recipients of corporate largesse, it has insisted on transparency and its participation in the formation of the rules and delegated legislation under the new Companies Act. The government is sure to oblige.
After all, unlike the slogan shouting, hunger-striking, rasta-rokoing unwashed masses, corporate lobbyists look good, smell good, drive fancy cars and are ideologically and culturally acceptable to bureaucrats, politicians and even many judges.
It is these ideological similarities that provide the traction required to dismember laws that are protective of the rights of working people, or the environmental rights of communities.
Take, for instance, the life of the Environmental Impact Assessment Notification, 1994, which was issued to put in practice the commitment made by India at the Rio earth summit. The notification legitimized the right of communities to information about the impact of projects in their localities and to participate in environmental decision-making. In no time, the industry and government realized that the law put too much power and information in the hands of citizens. In place after place, environmentally destructive “development” projects were being delayed and defeated unless public hearings were stage-managed and controlled by gun-toting militia or police. In 2002, the Govindarajan Committee on Investment Reforms identified environmental laws in general, and the EIA Notification in particular, as impediments to investments. The diagnosis for India’s ailing economy was clear – democracy was the disease.
The 1994 Notification eventually gave way to the EIA Notification, 2006. In the lead-up to the publication of the draft EIA Notification, 2006, the Ministry of Environment and Forests held several rounds of face-to-face consultations with various industry organizations. No such meeting was held to consult civil society organizations or representatives of local bodies. In fact, on 26 April, 2006, well after the 60-day draft comments period was over, the PMO directly intervened and directed the ministry to complete consultations with major industry associations, including real estate lobby groups, auto manufacturers and mining interests.
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Election Commission figures reveal that between 2003 and 2007, the Congress party received Rs 52 crore in declared contributions. Seventy five percent of this (Rs 39 crore) was from companies and organizations that would benefit from relaxed environmental regulation. From mining companies, there was Rs 1.5 crore; from the builder lobby Rs 2.4 crore and Rs 17 crore from the Tata Group, followed closely by other corporate majors such as L&T, Ranbaxy, Videocon, ITC, Lupin, GMR, Jindal Steel and Mahindra & Mahindra. Many even hedged their bets by funding the BJP.
Corporate contributions to political parties threaten to capture merely one (the legislature) of the four pillars of democracy. The judiciary, the executive and a free press are the others. A recent article in The Caravan about the rightward, pro-Reliance shift of the Network 18 media group, the Radia tapes, and the Wikileaks exposé on US intelligence agency Stratfor’s alleged links with Indian Express editor-in-chief Shekhar Gupta, leave little doubt about the freeness of “free press” in India.
Of the four pillars, the judiciary is arguably the only one that is relatively less tainted by corporate influence. But only relatively, and certainly not for lack of trying by corporate agents.
Judges who would cite codes of judicial propriety to avoid participating in meetings organized by NGOs or civil society organizations have shown little hesitation in gracing corporate events. Industry lobby groups like the CII and FICCI conspire to organize innocuous-sounding events – moot courts, roundtables and workshops – where judicial officers are invited to engage with critical and current legal issues.
Earlier this year, Justice Abhay Mahadeo Thipsay – a sitting judge of the Bombay High Court – chaired a session on ‘Regulatory and stakeholder engagement’ at the Nuclear Law Association’s second annual conference. The association represents the interests of global corporations looking to profit from the nuclear energy business. The original agenda had the Chief Justice of the Bombay High Court delivering the Presidential address. Thankfully, the name was dropped. During the program, speakers were to talk about lessons for public engagement post-Koodankulam. Justice Thipsay’s participation at this meeting raises important questions. Would a sitting judge be allowed to participate in a seminar, organized by fishermen protesting against the Koodankulam plant, to discuss ways of preventing the NPCIL from expanding the nuclear park? I presume not.
Curiously, while persistent agitations by fisherfolk and Adivasis against corporate exploitation are baselessly branded as foreign-funded, Maoist-infiltrated and anti-national, actual foreign-funded corporate events that exert an illegitimate influence on democracy are endorsed by all of its four pillars.
In 2011, Down to Earth reported that Microsoft and the Indian Music Industry funded a roundtable conference held by FICCI for judges from Maharashtra on intellectual property rights; judges handling piracy cases were special invitees, and one of the sponsors added a condition that Human Resources Minister Kapil Sibal should inaugurate the session.
Even more insidious is the entry of the corporate agenda as an academic exercise. While judges with some sense may avoid in-your-face corporate events, they may find nothing wrong with attending an event organized by a university or a law school.
In 2010, a number of eminent health activists and NGOs wrote to the Minister of Commerce and Industry complaining about a “legal education” program fronted by George Washington University (GWU) for Indian lawyers and judges. The letter refers to a prominent university faculty member saying, “…one of the goals of the India Project – the objective of which was to create interactions between leading US, European, Asian and Indian academics, industry leaders, lawyers, judges and policymakers in the field of intellectual property – was to work closely and cooperatively with Indian judges to ensure not just enaction but enforcement of patent laws. Because it’s all fine to have good laws but the important thing is to enforce them.”
GWU’s India program, which was pulled together by the US India Business Council and the CII, was funded by pharma and software giants including Novartis, Qualcomm and Microsoft. For good measure and greater legitimacy, institutions such as the National Law University were roped in as venues and local co-hosts. The event attracted judges – unsuspecting, I hope – from the Supreme Court and Delhi High Court.
The NGO letter to the Minister of Commerce notes that “the moot court problem placed before the judges related to enforcement of intellectual property rights. This is an area of growing controversy as developed countries like the US and EU and their multinational pharmaceutical companies are pushing for greater enforcement – these issues are before the courts in many cases (sub-judice) and it is of great concern that judges of the Supreme Court and Delhi High Court were presented with similar problems at a summit funded by multinational pharmaceutical companies. It is evident that the Supreme Court, the Delhi High Court, the Ministry of Law and Justice and the Ministry of Commerce and Industry were not fully informed of who was funding/co-organizing this summit.”
I’m not so sure that those in positions of power were not fully informed of who was organizing the summit. The reason: Rather than distancing themselves from the lobby group, the Indian government had permitted GWU to cement stronger ties with the state-supported Indian Institute of Technology-Kharagpur. The two institutes collaborated to open an elite law institute in 2006 that “[uses] modern classroom technology and dynamic teaching methods to produce lawyers equipped with the knowledge and skills to handle sophisticated legal matters, including complex commercial transactions and cases.” The institute is called the Rajiv Gandhi Scholl of Intellectual Property Law.
The Superhuman Corporation
It is no accident that governments and even people tend to engage with corporations as if they were persons. Some of the discussion that followed the CII letter to the Ministry of Corporate Affairs hinted that corporations may be averse to disclosing their political affiliations for fear of backlash from shareholders or rival political parties.
Such a surmise presupposes that a corporate entity itself can have a political affiliation. Despite being a legal artifact, corporations have been proactively projected by business lawyers and trade groups as a being imbued with human qualities – capable of exhibiting loyalty, patriotism, embarrassment, discomfiture and even social responsibility. If free-market guru Milton Friedman were alive, he would have ridiculed such a notion. Indeed, his take on corporate social responsibility is astute: “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits.”
Since the time that ‘corporate personhood’ was introduced into American jurisprudence through a court reporter’s notings in the margins of a US Supreme Court ruling in 1886, corporate lawyers have steadily strengthened the notion of “personhood” to allow corporations to enjoy all rights, including those reserved only for natural persons. The 1886 ruling conferred on corporations the constitutional right to equal protection under law provided under the 14th Amendment to protect newly freed slaves. In a more recent and celebrated US case called Citizens United vs. Federal Election Commission, the Supreme Court in a 5-4 ruling gave Citizens United – a political action committee promoted by the multibillionaire Koch Brothers – and other corporations the right to free speech. A minority view of four judges, however, held that First Amendment protection of free speech in the US constitution applied only to individuals and not associations of individuals.
Just two days ago, on December 2, 2013, corporate lawyers made another significant advance. The US Supreme Court has agreed to hear a case that will decide whether a corporation can have religious sentiments and belief. The case was filed by the Baptist owners of Hobby Lobby – a chain store – who claimed that the Obama administration’s health care law mandating the provision of contraception for women violated the Christian religious belief of the owners, and was therefore unconstitutional. In July 2013, an Appeals court in Denver ruled for the corporation.
In India, too, this culture – of treating corporations as important citizens and allowing them entry into the most sacred democratic spaces – has taken root. If the Aadhaar scheme, the brainchild of IT entrepreneur Nandan Nilekani (who also happens to be its chief beneficiary), is an example of business bypassing Parliament, there are more examples of big business residing within the legislature.
In the revolving door between business and politics, the Rajya Sabha has for long been the preferred wayside stop for Indian billionaires – Rahul Bajaj; Finance Minister P. Chidambaram’s maternal uncle and cement baron Dr MAM Ramasamy; Thermax’s Anu Aga; former Hindustan Lever chairman Ashok Ganguly; Alchemist group founder and Tehelka’s majority owner Kanwar Deep Singh; Vijay Mallya; and mine owner Anil Lad are some of the prominent ones.
From being wary of foreign capitalists, Indian industrial houses are also closing ranks with foreign MNCs to ask for a smaller government, self-regulation and an increased profit share from delivery of essential social services and commodities. The line separating government and business is blurring even more.
What makes “corporate persons” particularly problematic for democracies is that they are more than human. They have practically all the rights that people do, without their vulnerabilities. Lord Edward Thurlow of England is supposed to have said: “They have no soul to save, and they have no body to incarcerate.”
This invulnerability, combined with their increasing influence over all pillars of democracy, should make one wary of anything that provides increased protection or space to the corporate being. Seen from such a cautious vantage point, the question is not merely about whether a corporation should disclose the names of its political beneficiaries. Rather, the question is whether or not it is even feasible for democracy and the corporation to co-exist.
Nityanand Jayaraman isa Chennai-based writer and social activist.
The Companies Act & Corporate Contributions
Companies Act, 1913, enacted. Contained no reference to contributions by businesses to political parties.
Companies Act, 1956, enacted. Section 293 allowed contributions for charity and other purposes. Other purposes were not defined and were subsequently interpreted to also mean for political parties.
Jayantilal Ranchhoddas Koticha ... vs. Tata Iron And Steel Co. Ltd.
Justice Chagla allows TISCO to amend its Memorandum of Association to include contributions to political parties, but warns of corporate influence on democracy.
Section 293A is introduced to the Companies Act. The amendment places a ceiling on corporate donations at Rs 25,000 or 5 percent of average net profit for past three years. Names of recipients to be disclosed.
Companies Act (Amendment) Bill recommends an outright ban on corporate donations
Corporate donations to political parties banned at the behest of left-leaning and socialist parties. The ban was reportedly designed to “cut the clout” of business houses by the Indira Gandhi government. The Amendment observes, “Such contributions have a tendency to corrupt political life and adversely affect healthy growth of democracy.”
Between 1966 and 1969, 75 companies paid Rs 187 lakhs, of which Rs 144 lakhs were paid to the Congress party. Of corporate contributions received between 1962 and 1968, 34 percent were made by the Tatas and Birlas.
An effort to repeal the ban lapsed.
High-powered expert committee to review the Companies Act, headed by Delhi High Court judge and industry and trade union leaders.
The committee unanimously recommends continuing the ban on corporate contributions.
The Rajiv Gandhi government finally lifts the ban on political contributions.
License-raj scams begin to be replaced with foreign deal scams, including big-ticket defense deals.
CII makes a case for tax-deductible status for corporate contributions.
Dawn of coalition politics with United Front forming the government in New Delhi.
This new dawn also ended the culture of “contributing” to the major players in the Centre. Contributors began funding major regional parties at the state level, in addition to or even to the exclusion of national parties.
Indrajit Gupta Committee on Electoral Reforms strongly recommended Board of Directors’ and shareholders’ approval, through AGM voting, for political contributions.
Lok Sabha elections. Tata Sons floats the “Electoral Trust”. Funds collected were to be contributed to political parties in proportion to their share in parliament before and after elections.
Grasim Industries floats the General Electoral Trust. Unlike Tata’s trust that is open to receiving funds from any company, the GET was meant only for Birla group companies.
“Among the factors which the group considers while disbursing funds among the political parties are suggestions from its Advisory Board, and the overall business interests of the contributing companies in each State.” (V Venkatesan writing in Frontline, 1999)
Law amended to allow parties to accept any amount from Indian companies and citizens. The donations received by political parties in excess of Rs 20,000 to be annually reported by the treasurer of the party both to the Election Commission as well as to the income tax authorities, with details of contributors. No bar on cash contributions. Income Tax Act amended providing for 100 percent tax deduction.
The permit for cash contributions and the Rs 20,000 limit for disclosure was a perfect loophole. Companies could give several payments of less than Rs 20,000 in cash and avoid scrutiny. (Electoral Trusts qualify for 100 percent tax exemption. The trust should distribute at least 95 percent of its income for the objective it was set up for.)
Budget 2013-2014: The government facilitates the setting up of “Electoral Trust” companies that qualify for 100 percent tax breaks. Conditions apply. No cash contributions. Only cheque transactions.
Just so the beneficiary political party knows which company has funded it, the government has offered Electoral Trust guidelines that would allow companies to name the trust after their incorporated names.
The Companies Act amended to include provision on disclosure of political party beneficiaries of corporate contributions.