Governing Conflict of Interest

One of the major challenges facing accountability in governance in countries like India is to create mechanisms for governing conflicts of interests.

• The Chairman of Board of Control for Cricket in India (BCCI) Mr Srinivasan has yesterday appointed a committee reporting to him to investigate the illegal and criminal acts of his son-in-law Meiyappan arrested for spot and match fixing in Indian Premier League (IPL) 2013.
• Mamata Banerjee, the Chief Minister of West Bengal, has appointed an enquiry committee reporting to herself to investigate Sharadha Savings scheme scandal (a Ponzi scheme) managed by her party leaders.
• Members of Parliament in India regularly appoint their relatives as Special Assistants on government payroll to ‘assistâ them in the conduct of their parliamentary business.
• The newly appointed Comptroller and Auditor General (CAG) of India (whose responsibility is to audit governmentâs expenses) was Secretary of Defense in Government of India till this appointment; one of the biggest expenditures made by the Government of India in recent past has been on defense purchases, which have shown to be mired in huge corruption.

The stories mentioned above are just the most recent developments in the last week. In each of these examples, the professional ability of the decision-maker to take an independent and objective decision in the larger public interest entrusted is likely to be seriously compromised due to competing interests of the decision-makers.
In the culture of governance of public and private institutions in India, there is hardly any understanding or appreciation of conflict of interest. Appointing relatives and friends to positions of influence and power is a commonplace phenomenon by all political leaders. Recent revelations of corrupt practices of Pawan Bansal (disgraced Railway Minister) include appointment of his friends to the Boards of public sector banks, which in turn approved huge unsecured loans to companies owned by the family of Pawan Bansal.
A review of patronages and appointments of Indiaâs well-known former cricketers would throw up similar conflicts of interest. The captain of Indian cricket team (MS Dhoni) is a Vice President in India Cements Company whose Managing Director (Meiyappan) has been jailed for illegal betting and match fixing in IPL; he is also the owner of the most fancied team CSK in IPL whose captain is none other than Dhoni himself. Other well-known former celebrity cricketers manage private coaching academies and also serve as selectors of official teams. The recent scandal in badminton is a similar illustration of conflict of interest as the owner/coach of a private badminton academy was also the chief selector of players representing India.
What is this conflict of interest? Essentially, conflict is presumed to be arising between two or more interests of the decision-maker (s)—all professional interests or a combination of professional and personal interests---related to a decision-making situation.  Recognising such conflict (s) in advance of the decision is key to its governance; creating mechanisms and systems to eliminate and/or reduce the risks of affecting objective professional decisions in public interests can only follow if the recognition is explicit.
Many countries and institutions have created explicit policies for doing the same. Some Governing Boards of Corporates as well as NGOs (like PRIA, Synergos Institute and IDS, to name just a few)) have robust and clear mechanisms for recognizing and dealing with conflict of interests of the members of the Governing Boards. The City of New York has a Conflict of Interest Board which advises city officials and reviews compliance of procedures already in place.
In reforming governance in India today, recognizing and dealing with conflicts of interests is likely to be most critical. It is not merely a case of legislative lacunae, but also weak and limited understanding of the phenomenon of conflict of interests in the governance of public and private institutions of society today.
Rajesh Tandon