OUR good friend, Deepak Parekh, who is a prominent banker and sits on the boards of numerous companies, has come out with a clever argument in connection with the Bhopal holocaust. I call it holocaust, because that is what it is, and all other issues pale into insignificance before the horrible death of more than 20,000-odd people who perished in the inferno. Parekh says that so-called independent directors are not responsible for the crime and should not be held accountable for it. He is referring especially to Keshub Mahindra, who runs or used to run a big industrial complex and who happens to be non-executive chairman of Union Carbide, the company which ran the gas complex in Bhopal and killed all those people.
Parekh’s case is that Mahindra was only a non-executive chairman and therefore not responsible for the disaster, just as the Railway Minister is not personally responsible for all those accidents which kill innocent passengers almost every day. It is a strange argument, to say the least, and only an Indian can advance it.
What exactly does a non-executive chairman do, for god’s sake, if he is not to be held responsible for the company’s acts of commission and omission? Does he only collect his ample fees, has a slap-up lunch or dinner with champagne after the board meeting, and goes home with a fat cheque? Does he not take part in the proceedings? Is he not a part of the decision-making process? If not what exactly is his function to merit all that money? And if he does nothing at all, why does he get all those fees-and Parekh knows that they can run into lakhs of rupees a year-if he is not accountable for anything? I have the highest respect for Mahindra but surely somebody has to take the blame even if he is only an independent director. The buck must stop somewhere. In America, as President Truman once said, it stops at his desk in the White House. Where exactly does the back stop in a company like Union Carbide with its fugitive bosses who are the first ones to flee when the police are looking for them?
Assume, for the sake of argument, that a similar disaster had struck the Tata Chemical’s plant at Mithapur. What would JRD Tata, who was chairman of Tata Chemicals, have done? Firstly, there would have been no accident. The Tata plant is much older than Union Carbide’s and has never been involved in an accident like this. Having known Tatas for years, I can tell Parekh, JRD would have immediately tendered his resignation and asked the board to choose another chairman. Tatas would have assumed responsibility for the tragedy, promptly set apart a fund to help the families affected by the tragedy, and surrendered themselves to the authorities. They would not have run away in a special plane. This is what separates the Tatas and the Birlas from the Andersons of this world. Tatas and Birlas are Indians; Anderson is not, being interested only in the loot his investment can bring in. When the loot stopped, so did Anderson.
Men like Deepak Parekh seem to think that company directors have no other function than making money, printing fat annual reports and holding annual general meetings in five-star hotels. He should know things are not so simple now. In America, shareholders and others go around with tomatoes and stale pizzas to throw at directors and the so-called non-executive directors who make too much money. They take companies, which means directors, to court and throw them in jail. There are quite a few company directors and CEO’s who have seen the insides of jail in the US, and some of them must have been the so-called independent directors.
The latest one in line is Tony Hayward, the CEO of BP (or British Petroleum) whose head on a platter is being demanded by people in and around the states ringing the Gulf of Mexico where BP’s oil rig exploded, killing nearly a dozen men, and spewing millions of barrels of oil into the Gulf. In India, the foreign bosses run away and hide in Florida. In America, the chairman is summoned before the Congress and humiliated. Incidentally, Tony Hayward is a foreigner in America, as he is British, just like Anderson in India.
How can an independent director be independent of the actions of the board on which he sits, and for which he receives payment? How can a man-or woman-take money from a company, take part in its decision-making process, and when things are bad and the prosecutors are knocking at door, get up and say they cannot be touched, because they are independent? Once he or she sets up a relationship with the company, naturally becomes accountable for the company’s actions. You cannot take money and say you have nothing to do with the company who has paid you the money.
What happened at Bhopal was not an accident, it was a crime. The management, which means Anderson & Co, knew that the plant was derelict, had not been properly maintained for years, and was in use only because it yielded profits. The management knew that the plant would blow up any minute, yet it did nothing. The surprising thing is that nobody bothered. In multinational companies, nobody bothers as long as the loot keeps coming in. Even the so-called independent directors don’t bother, because they too share in the loot. And when the police surround the board and haul away the directors, they complain they have nothing to do with what has happened in the factory, because they have never visited it in the first place. It would be interesting to know if the BP boss, Tony Hayward, puts forward a similar argument in Washington-and makes laughing stock of himself.
The Jews of Israel sought out a concentration Camp killer called Eichmann, brought him to trial in Israel, and hanged him years after the act. Eichmann kept saying that he was only following orders and was not responsible for what happened inside his camps. But justice is justice and the man was hanged. There is, after all, a moral law which transcends all other laws including company law, by which our directors swear.
But what has business to do with morality?
(The writer can be contacted at 301, Manikanchan Apts, Kanchan Lane, Pune-411004)