Personal Accountability

Dr Bharat Jhunjhunwala
The law and order situation in Uttar Pradesh is fast deteriorating. Heinous acts such as hanging rape victims have become commonplace. The question is whether the Chief Minister is responsible for the failure of the police to prevent such acts. I remember Late Lal Bahadur Shastri having resigned as Minister of Railways taking personal responsibility for a rail accident. The underlying principle is that the way an organization works carries the stamp of the philosophy of head of that institution. The junior officials imbibe the attitude of-, and follow the path shown by the head. A rail accident will occur only when the Minister of Railways puts security on the backburner and focuses more on making profits or punctuality.
The principle of personal accountability of the head of an organization was upheld recently by the Supreme Court. The Court refused to quash a FIR lodged by an Indian Company against Mr. Lee Hun Ki, CEO of Korean major Samsung Electronics. The Indian Company has supplied some material to the Dubai branch of Samsung. Thereafter a fraud was discovered at the Dubai office of Samsung and some officials were sent to jail by Dubai courts. Yet, payment to the Indian Company was not made and the Indian supplier filed a case of cheating against Mr. Ki in Ghaziabad. The Ghaziabad court asked Mr. Ki to be present in person as required under Indian law. Samsung, however, applied to the High Court to quash the FIR. The High Court turned down the request and asked Mr. Ki to appear before the Ghaziabad court. In the result Mr. Ki, the richest man of Korea, was required to appear before the Ghaziabad court. It is another matter that Mr Ki has not yet appeared before the Ghaziabad court.
Similar treatment was meted out by the Apex Court to Subrata Roy of Sahara. Sahara had collected about Rs 25k crores from people for a housing project. The offer was through convertible debentures. Our share market regulator SEBI held that this was illegal since Sahara had not taken permission before issuing such debentures. The Supreme Court directed Sahara to refund the money and, Sahara failing to do so, CEO Subrata Roy was sent to jail.
There appear to exist an international consensus that CEOs must be held responsible for the doings of their Companies. This approach led to Mr. Kenneth Lay, CEO of the multi-billion dollar oil major Enron being sent to jail a few years ago. The Company was involved in large scale trading in oil. There CEO subjected the staff to intense pressure to earn profits. At the same time he was lax in transparency and accounting diligence. This led to young and aggressive executives entering into risky trades and making huge losses. These losses, however, were not disclosed to the auditors, staff, authorities and the shareholders. Ultimately, the Company sank under its burden of debt and was declared bankrupt. Mr. Lay was jailed for not taking proactive steps to disclose the losses in due time. Profs O. C. Ferrell and Linda Ferrell of University of New Mexico wrote: “There appears to be agreement among public policy decision makers, the judicial system, and other stakeholders that CEOs are responsible and accountable for decisions or their complacency related to the ethical and legal performance of the corporation.”
The tragedy at Uttarakhand last year is yet another case where such accountability of the politicians, officials of the government and CEOs of hydropower companies must be sought-but has not be done yet. The Tehri Hydro Development Corporation has built a huge reservoir. Huge evaporation took place from this reservoir in the hot month of June. This vapour condensed at Kedarnath and came down in form of a cloudburst. The mountains in the area had been weakened by repeated explosions undertaken for road construction and for making tunnels for hydropower projects on the Mandakini River. As a result the topsoil on the fragile hills was loosened. Previously the rainwater would seep into the hills taking cue from the roots of the trees. After getting loosened, the soil could not withstand the heavy downpour and started sliding into the river. It uprooted the threes and carried them into the river. The problem was compounded by muck disposal by the hydropower companies on the riverbanks. They did not make strong walls to prevent the muck from flowing into the river. The muck was set loose. The river started to carry the soil loosened from the hills, the tree flowing in with the soil and the muck deposited by hydropower companies but it faced an obstruction in form of barrages built by the Phata-Byung and Singoli-Bhatwari hydropower projects. The river would have carried these sediments to the plains had there been no obstruction. But the barrages prevented her from performing this natural function. Remember the entire Gangetic plain from Haridwar to Ganga Sagar has been made by such carrying of sediments by the Ganga and her tributaries. The muck got accumulated behind these barrages leading to the river cutting the hills on the side and forming a new path. The river flowed in a zigzag manner in the new path and scoured the villages located on her banks leading to thousand losing their homes. Entire villages like Chandrapuri were swept away. Ten thousand people lost their lives because the politicians like Atal Bihari Vajpayee pushed the construction of Tehri Dam without requiring a proper environmental assessment to be made; courts were led by the public consensus in favour of increased generation of electricity at any cost; and officials looking the other way when local people had pointed out these impending dangers during Public Hearings  for granting of environment clearance to these projects. The CEOs of hydropower companies too did not care to follow even the limited directions to dispose the muck properly.
The underlying issue is that of philosophy of the head of an institution. Single minded focus on political expediency on part of politicians; keeping the Ministers happy on part of officials; and profits by CEOs of the hydropower companies has led to various problems like rail accidents, Uttarakhand disaster and rape victims being hanged in UP with impunity. These problems are all logical outcomes of the philosophy of the head. Lal Bahadur Shastri, Lee Hun Ki or Atal Bihari Vajpayee were not personally involved in the rail accidents, non-payment of dues to a supplier and the increased evaporation from Tehri Reservoir. Yet the philosophy they espoused led to these happenings. It is correct, therefore, for the Chief Minister to be held responsible for the rape and hanging of women in UP.
(The author was formerly Professor of Economics at IIM Bengaluru)

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