Both Union Carbide and Uber followed the letter of the law in the US, but failed to do so in India. Are lives in India that cheap?
Corporate responsibility in India is often confused with Corporate Social Responsibility. CSR is defined as the overall positive impact that the company has on the society and the state through various activities. This was plugged into the new Companies Act 2013 (2% of the company’s profit must be channelled to socially beneficial projects under CSR). However, what I am trying to highlight is the responsibility that the company has towards the employees and the general public at large. While most companies are initially set up on the bedrock of a brilliant idea that would find multiple takers, the ultimate aim of any company is simple – Make money. There might be a few set up to serve a larger purpose, but those are fewer in number.
Three recent developments in the business world have put the spotlight on corporate responsibility. Even today, there is still a question mark on how to hold corporations accountable for their actions, especially when they have widespread ramifications not just in terms of the employees, but also the larger public. We take a look at three major instances involving high-profile companies and look at how companies responded to them and the legal battles they endured and if their response was justified.
Bhopal Gas Tragedy
What happened: December 2, 2014, marks the 30th anniversary of the worst industrial accident in the world. That night a pesticide plant in Bhopal, which belonged to Union Carbide, leaked a deadly gas – methly isocyanate – and other chemicals into the air. More than 8,000 people lost their lives in the first few days and many were left with permanent and partial disabilities. More than 20,000 have lost their lives in Bhopal to various illnesses from inhaling the toxic chemicals. The water, air and the soil continues to be filled with toxins and to this day victims of the Bhopal gas tragedy are fighting for their rightful compensation for the industrial accident.
What did Union Carbide do wrong?
Everything. Firstly, the plant that was set up in Bhopal at a place where there was a significant civilian population. Even more alarmingly, it was not the same standards as the plants in the US either in terms of technology, trained personnel or design features despite the plant handling very dangerous chemicals. That itself was the foundation for the disaster. Intentionally using inferior manufacturing set-up with a majority of the staff hardly been trained points to malpractice.
Former employee T. R. Chouhan recalls that though there were many instances of minor leaks at the plant, the top management did not take cognisance of it. They did not even have the right kind of safety procedures in the event of a gas leak. No alarm was sounded. Neither the public nor the local authorities were warned about the deadly nature of the gas. They, in fact, tried to downplay the accident. When reports of deaths started pouring in, that’s when they acknowledged that the gas was Methyl Isocyanate. In fact, their inhouse doctor Dr Loya told the press that it was not a deadly gas but something similar to tear gas.
Union Carbide’s complicity in the catastrophe is telling. It has always maintained that it had nothing to do with the Indian plant although it was a subsidiary. It reached a settlement with the Indian government to pay about $5-7 million in aid. But what followed stunned the nation. The Central and the state governments did nothing to take action against Union Carbide. CEO Warren Anderson was given the red carpet treatment and taken to a guest house where the local court had issued a summon for his arrest. Thereafter, he flew to US never to return. He died there this year. In June 2010, eight Indian employees, including Keshub Mahindra—the patriarch of Mahindra & Mahindra—were found guilty of negligence and not culpable homicide, and were eventually let off on bail.
To this day, Union Carbide, which has now being taken over by Dow Chemicals, maintains that they did nothing wrong and there was sabotage involved. All the evidence on the ground points to the contrary. This is one case where the government could have done a lot more. Instead, it showcased how the law machinery completely broke down and the people of Bhopal continue to suffer since 1984.
Satyam Fraud Case
What happened: In 2009, Satyam Computer Services Chairman Ramalinga Raju confessed that the company’s accounts had been falsified. According to market regulator SEBI, Satyam had made financial mis-statements to the tune of Rs. 12,320 crore. Soon after the scam was unearthed, the government had stepped in and ordered an auction for sale of the company and it was eventually acquired by Tech Mahindra and was later merged with it.
What did Satyam do wrong?
To start with, Raju, his family members and other accomplices sold or pledged shares at inflated prices, which was done by overstatement of bank balances, creation of fake customers, over-statement of revenues and under-statement of liabilities. The SEBI probe also found more than 7,000 fake bills furnished by a single executive. Ficticious invoices were created to show fake debtors on the Satyam books, bank balances were inflated and there was a huge mismatch in the TDS amounts. When the news of the Satyam scandal broke out, it turned out to be the biggest corporate fraud case in the country.
In December 2014, a Trial Court in Hyderabad sentenced Raju and his brother Rama Raju to six months imprisonment and a fine of Rs 10 lakh each. Former CFO Vadlamani Srinivas and ex-CEO of Satyam Ram Mynampati were also sentenced to six months imprisonment, beside a fine of Rs 10 lakh each. Ideally, the scandal should not have happened in the first place as the company had engaged global body PricewaterhouseCoopers as its statutory auditors. But, they were caught napping and the US Securities and Exchange Commission fined the Indian arm of PwC a record $6 million for not following its code of conduct and auditing standards. Funnily enough, the company had just the previous year (2008) won the the coveted Golden Peacock Award for Corporate Governance under Risk Management and Compliance Issues.
Uber rape case
What happened: In the second week of December 2014, a young woman who was going from Gurgaon to Delhi in an Uber cab alleged that the driver had taken her to a secluded spot and raped her. The police through various leads managed to nab the accused, Shiv Kumar Yadav, at his hometown Mainpuri in Uttar Pradesh. It turns out that Yadav is a serial offender as many more women have come forward with testimonies accusing him of raping them. He has five cases of sexual assault against him, three cases under the Goonda Act and one case for illegally possessing firearms.
What did Uber do wrong?
In the initial few hours after the rape was reported, Uber did two right things. One, they acknowledged that the driver was driving an Uber cab and that his services would be immediately suspended and two they put out a statement that they were cooperating with the police to help nab the accused. However, the police did have a tough time dealing with Uber, according to news reports. In fact, they spent almost two days trying to find the office of Uber. While they put out a statement supporting the victim, they have not contacted the woman or the driver. As news of the crime spread, there were calls to ban Uber as they did not verify the background of the driver properly. It turns out that the accused had produced a false police certificate. However, the Centre banned the services of Uber in Delhi NCR and then followed it up with a countrywide ban, deeming it unsafe for travel as one could turn off the GPS by uninstalling the app or switching off the phone. While most people are divided over the action taken against Uber, everyone agrees that the cab company had the responsibility to ensure that the driver was not wanted in any criminal cases. Uber does background checks of its drivers in the US, but clearly in this case it had not done its homework.
Check them before it becomes too late
You can be global, but have to be local too
When Uber launched its services in India, it soon became the preferred mode of transport for many. But, while it worked perfectly well in countries like the US, in India, the story is a whole lot different. This is because women’s safety has been a very contentious topic throughout the country. Despite the strides that women have made in many aspects of life, family folk always worried about their wives, daughters and mothers who were out late in the night. In a country like India, the Uber incident was waiting to happen. Uber, which has been facing flak across the world for disrupting the taxi service area, has hit the biggest hurdle in India as the government is readying to take action against the San Francisco-based company. While an app may be applied globally, it need not necessarily have the same results everywhere. Uber needs to be congnizant of the Indian scenario before it takes any further steps.
Firms adhere to US laws, not Indian ones
The Bhopal gas plant is a classic example. When the plant was set up, the company did not bother to keep the same level of design, robustness and safety in place as the parent plant in the US. Not only that, in the name of cost cutting, Union Carbide cut down the maintenance of the plant and the staff. They did not adhere to any of the emergency procedures they would have normally followed in the US and left the people of Bhopal to fend for themselves.
In the Uber case, the company officials in India admitted that they did not verify the background of the 4,000 drivers working for it in Delhi. The only thing that Uber did with its drivers was a four-hour training where they were taught how to talk and behave with the customers and use the app. In the US, all ridesharing and livery partners must go through a rigorous background check, which is a three-step screening including county, federal and multi-state checks.
What is it in India that prompts companies to ignore the laws here? While both the companies mentioned above ensured that they followed the rule of the law in the US, they completely ignored that in India. Is it because the justice system is so ineffective that they know that they can get away with it? Has precedence or history taught them that it is okay to work around the law here? Are lives in India that cheap that no one really cares if a major catastrophe continues to poison the sons and daughters of our land?
While there have been many changes in the Companies Act, the government needs to ensure that private corporations don’t take either the government or the public for granted. And this will need much more than a change in legislation. The government of the day has to show that it is serious about taking action against corporates if they go against the law – no matter who they are and how mighty they are. While the Narendra Modi government is busy wooing multinationals to set up shop in India, it would do well to remember that a robust judicial system and a strong law would prevent these corporates from indulging in fraud or malpractice. With many companies eyeing India for exponential growth, the country needs to clean up its act and fast.
- 2. http://gadgets.ndtv.com/india/news/satyam-fraud-case-sebi-reports-mismatch-of-over-rs-12000-crore-559220
- 3. http://www.dnaindia.com/india/report-we-did-not-run-background-checks-on-4000-drivers-plying-on-delhi-roads-says-uber-2042510