Opening the books — Corporates must emulate the Tatas

Having promised to devise a transparent scheme for funding political parties, the Tatas have now delivered one. The intention behind the Electoral Trust set up by Tata Sons on behalf of the Tata group of companies is a praiseworthy mix of idealism and realism. The first step is courageous and involves removing the secrecy in corporate funding of political parties. Since it is registered as a public Trust, political contributions will be open to public scrutiny. The second is pragmatic. Regularising and centralising the process of making party contributions will free the managements of individual companies from seasonal and unseasonal pressures from party fund-raisers. Even as the interests of individual companies and the group can be pursued in an open fashion, moral hazard can be avoided. Shareholders ought to be pleased about the cap on contributions from Tata companies which, with the approval of their boards, may put up to 5 per cent of the average net profit in the last three years into the Electoral Trust. A second and prudent ceiling on disbursements from the Trust will set automatic limits to the greed of political parties.

For decades corporate funding of political parties has been the subject of dark speculation about the political preferences of the business and industrial community and the factors influencing party policy. Now, for the first time, the largest corporate house in the country is prepared to open its books and allow informed conclusions to be drawn. This marks an important step towards cleaning up the electoral system. Clandestine funding of parties and politicians has warped the system and policy-making. Not only have hidden agendas been set, parties and companies alike have been corrupted as well as individuals on both sides. The Jain hawala case in which every national party barring the Communists was implicated carried political contributions to the point of absurdity. If for no other reason, the Tata Trust model should recommend itself to other corporates simply as a useful defence mechanism against the extortionate demands of politicians.

This said, the flaw at the centre of the Electoral Trust needs to be pointed out. The words “non-discriminatory and non-discretionary” with reference to political contributions suggests a rigid formula will be applied. All parties winning at least 5 per cent of parliamentary seats (excluding those with undemocratic, terrorist and secessionist tendencies) will be funded on the basis of electoral performance. It is understandable that the Tatas do not want to be seen to be making a political choice in the exercise of their formidable financial clout. But is such a degree of non-partisanship possible in the real world? Is it desirable from the point of view of group companies to exclude party economic programmes from the criteria? One should not expect corporates to behave any differently from individuals or non-business groups who have interests to lobby for. Companies are not uninvolved umpires. What is important in a democracy is the open pursuit of one’s interests and preferences.