A necessary reform: on conflict of interest

We need to make disclosure of conflicts of interest mandatory

December 30, 2017 12:15 am | Updated 12:15 am IST

Set road signs made of wood or metal for your design project. Isolated on white background. Vector, illustration EPS10

Set road signs made of wood or metal for your design project. Isolated on white background. Vector, illustration EPS10

In 1990, B.G. Deshmukh, who was Principal Secretary to Prime Minister Chandra Shekhar, asked whether he could join a large conglomerate, post-retirement. He had served for decades in the government and wanted to move out, if permitted, towards a corporate role. Discretion marred the approval process, ranging from verbal assurance to written disapproval. While the reasons for declining might be varied, such incidents highlight the need for removing discretion and codifying the conflict of interest inherent in having senior bureaucrats assuming corporate roles post-resignation or retirement.

Best practices elsewhere

The idea of conflict of interest should naturally be linked with the aim of preventing corruption. In the West, conflict of interest is seen to be at the root of all abuse of power by public officials for private ends. For most of Britain’s history, conflict of interest with the rulers and their officials was rife — everyone expected such leaders to take advantage of their position. Even Samuel Pepys, the great diarist and reformist of the Royal Navy in the 1660s, was alleged to have been involved in smuggling. However, over time, the culture was changed. The Crown’s ministers sought to increase bureaucratic efficiency, especially in the collection of taxes, in order to fight the rising number of wars that Britain was involved in. A flourishing press and an independent judiciary placed limits of the executive’s power and its potential for abuse. The spread of education made people more aware of their rights, and the establishment of a national auditor’s office led to limitation on corrupt behaviour in governance. By the 20th century, corruption weakened considerably.

Some bureaucrats seem to have meshed the virtues of public service with private profit in retirement. They expose themselves to a potential conflict of interest — which when working in government is not automatically linked, in actions and perceptions, to corruption. Instead, when whistleblowers and leaders with a conscience ask pertinent questions, terms such as “anti-growth” and “anti-investment” are used to target them. To solve this conundrum, it is important to understand the scale of the problem, determine the right legal mechanism to deter and work towards changing our lackadaisical cultural norms on conflict of interest.

Vested interests have increasingly captured regulatory boards — consider the case of the Food Safety and Standards Authority of India. This regulator is theoretically supposed to be independent in monitoring food safety and yet, until 2014, industry representatives were regularly been appointed to scientific committees. It’s not that there are no policies against this on the books. India has an official policy, regulated by the Ministry of Personnel, whereby senior bureaucrats have to seek permission for commercial employment after their retirement. However, such grants of permission within cooling-off period depend primarily on government discretion, with no codified mechanism. There is nothing wrong in letting experienced bureaucrats utilise their expertise in the private sector — if adequate rules are framed and followed that enable the elimination of any conflict of interest.

We need legislation to make non-disclosure of a conflict of interest punishable. As with E.M.S. Natchiappan’s private member’s bill (The Prevention and Management of Conflict of Interest Bill, introduced in 2012), the legislation ought to cover all arms of governance, including the judiciary, the legislature and the executive. The recommendation of the Parliamentary Standing Committee on the Department of Personnel and Training (Report No. 60 dated May 3, 2013), calling for early retirement if interested in post-retirement private service is established, needs to be implemented, besides increasing the mandatory cooling period to five years so that no undue influence can be exerted by the retired bureaucrat. Also, the reasons for declining their requests for joining such firms need to be laid out clearly, to limit political concerns.

Towards transparency

Finally, a culture of transparency needs to be fostered. It is not enough to simply have a non-public register of member’s interests for legislative representatives. Bureaucrats, retired and current, should talk openly about their post-retirement plans. Public disclosure of their interests would clear the air, enabling their views to be given appropriate merit. An open, public data platform enlisting all post-retirement appointments of civil servants will increase transparency. If we seek acknowledgement of conflict of interest in the corporate world, with significant oversight through consumer watchdogs, credit rating agencies and activist shareholders, we should also the same in our governance.

Perhaps some of this is cultural. We, as a nation, reacted differently to the Rajat Gupta case, with its inherent conflict of interest concerns, compared to prosecutors in the U.S. Such conflicts should be codified in a stringent legal framework, making compromise of the public interest a serious crime. Cleaning up business interests, and strengthening a moral code over such conflicts is needed. Without such transformation, India’s society, governance and its private sector will remain open turf for insider trading.

Feroze Varun Gandhi is a MP representing the Sultanpur constituency for the BJP

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