Politics, Ethics and Social Responsibility of Business

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CORPORATE SCANDALS |

magnitude of the devastation was unprecedented. Estimates suggested that as many as 10,000 may have died

and nearly 50,000 fell seriously ill.

The catastrophe raised some serious ethical issues. It is a brazen example of evasion of corporate

responsibility. The pesticide factory was built in the midst of densely populated settlements. UCIL chose to

store and produce MIC, one of the most deadly chemicals in an area where nearly 120,000 people lived.

The MIC plant was not properly designed to handle a runaway reaction. When the uncontrolled reaction

started, MIC was f owing through the scrubber at more than 200 times its designed capacity. MIC in the tank

was f lled to 87% of its capacity while the maximum permissible was 50%.

As part of the UCC’s drive to cut costs, the workforce in the Bhopal factory as brought down by half

from 1980 to 1984. This had serious consequences on safety and maintenance.

In addition to causing the Bhopal disaster, UCC was also guilty of prolonging the misery and suffering

of the survivors. By withholding medical information on the chemicals, it deprived victims of proper medical

care. By denying interim relief, as directed by two Indian courts, it caused a lot of hardship to the survivors.

25.7 COMBATING CORPORATE FRAUDS

There is now a widespread recognition by international governmental organisations, by national governments

and civic and professional groups that major efforts to combat corruption are needed. Business organisations

and corporations should work in support of such efforts. This requires a comprehensive anti-corruption

strategy.

Corporate governance guidelines and the best practices have evolved over a period. The Cadbury Report

on the f nancial aspects of corporate governance, published in the United Kingdom in 1992, was a landmark.

The Sarbanes-Oxley Act 2002 has brought about sweeping changes in f nancial reporting and has laid down

new accountability standards.

The OECD Principles of Corporate Governance have recommended good practices in corporate behaviour

with a view to rebuilding and maintaining public trust in companies and stock markets. The revised principles

call on governments to ensure effective regulatory frameworks and on companies to be more accountable.

The principles include increased awareness among institutional investors, enhanced role for shareholders in

executive compensation, greater transparency and effective disclosure to counter conf icts of interest.

The recommendations of the Kumar Mangalam Birla Committee on Corporate Governance set up by

SEBl are now enshrined in clause 49 of the Listing Agreement of every Indian Stock Exchange.

25.8 CONCLUSION

Most countries are discovering that corrupt practices can be managed and brought under control, although

constant vigil will be necessary to prevent deterioration. In Caiden’s opinion, the following factors seem to

be crucial.

Moral and trustworthy leaders: Able and virtuous people have to be attracted to public service and

retained without great personal sacrif ce. There has to be instant removal from off ce of anyone with dirty

hands, and immediate disciplinary action against anyone who condones corruption.

Appropriate social regulation: A root cause of corruption is virtually no support for social controls.

Regular law revision: Repeal is needed of vague, anachronistic and internally contradictory laws and

regulations that prevent the law-abiding from conducting their business in a lawful manner.

Reduction of monopolies: Inevitably and almost unconsciously, monopolies exploit their position.

Where competition cannot be introduced, they have to be carefully monitored and subject to transparency

and there must be full accountability to ensure that their actions are legal, moral, productive, sensitive and

effective.