Private Sector Corruption and Martha Stewart
While everybody loves to talk about corruption in the public sector,
we for some reason lose this enthusiasm when it comes to the goings on
in our large and vocal private sector.
When confronted with the evidently outrageous incidents of bribery
taking place during his short-lived premiership, Ranil Wickremasinghe,
famously observed “ for there to be bribe takers there has to be bribe
givers”. This superior sounding statement is of course not replete with
hitherto unknown insights.
Even a first year law student would point out that bribery is an
offence that requires two participants. Because we are in the habit of
cheering even the most commonplace statements of our politicians they
have perhaps decided that no intellectual effort is required when
addressing the Sri Lankan public.
This observation was made when addressing some high-ranking business
leaders sometimes referred to as captains of industry of this country.
Strangely, even these men of the world were perturbed by the persistent
demands made on them by the politicians running the country this self
proclaimed advocate of clean politics was Prime Minister and turned to
him for protection.
Despite the haughty tone and manner of his response, this politician
could not have found a more friendly audience in Colombo. There is
hardly any difference in the minds of these movers and shakers of the
city and that of Mr. Wickramasinghe when it comes to the ideal scenario
for this much-wronged country.
But this community of interests between the business magnates and
their preferred political leader has to accommodate the greedy snouts in
the trough. Ranil’s blithe observation, while diverting attention from
the grubby fingers of his ministers to the slick private sector
operatives, leaves no doubt as to on whose side he will ultimately be if
pushed to take a position.
Those little politico boys are demanding candy only because you bad
grown-ups are laying them in front of them.
This put-down by their favourite politician perhaps reveals more
about our private sector ethos than was actually intended to by him. It
could well be that in the final analysis the prevalent corruption in
this society emanates from our business world.
An under-developed system provides businessmen plenty of dark
uncharted spaces to operate in. Taking advantage of a weak system they
can make windfall profits in all kinds of manner.
It may just be a matter of importing an item like cars and then
dumping them on a government department at a big profit, with the active
cooperation of the political/department leadership.
Another common method is to win a contract for building a public
utility like a road to certain specifications/material, and then end up
doing it with inferior material. Whatever the method chosen, the path to
riches is through the patronage of politicians and officials.
In this situation it is a simple matter of common sense that the
businessmen begin to “look after” their patrons.
They both operate on the basis of self-interest at any cost and it is
only a natural conclusion that by joining hands there is more to gain.
But not all private sector corruption is connected to public
officials. Even if there is no public servant in sight, corruption seems
to be rampant in this sector. It is now considered the standard practice
for those in the construction business to offer kickbacks to directors
of companies with whom they have contracts of work.
As we know an incorporated entity like a company is a complex
institution with varied stakeholders. When an official of a company is
receiving money under the table from a contractor, whose interests is he
serving? Certainly, it cannot be the interests of those stakeholders.
Any action of company officials, which violate either the laws or our
sense of ethics, diminishes the prestige of that company and threatens
its corporate image. It is commonly believed that gifts and commissions
lubricate almost every activity of our private sector. When a company
buys furniture, both the purchasing officer and the director approving
payment will receive privately at least a double bed from Moratuwa. When
the company books a sea-side resort for their annual outing the director
concerned will get a separate weekend for the family with the
compliments of the hotel.
We are supposed to be a hospitable race and this kind of generosity
may warm the hearts of those preaching the virtues of giving and
receiving. But at the time of receiving the favour that company official
was acting in the name of an incorporated body. Had he declared the gift
to his peers in whose opinion there is minimal conflict of interest and
in any event the matter so trivial, all’s well. But we know there is
very little of this kind if transparency in our systems.
At even a higher level, there are suspicions that the big players and
insiders manipulate our tiny stock market to the detriment of the small
investors and the market. The standards expected from insiders in these
matters can be illustrated by the famous Martha Stewart case in the USA.
Martha Stewart built up a large fortune as a life-style brand leader.
Second in a family of six children she displayed her commitment and
entrepreneurship from a young age, organising neighborhood parties and
gatherings at the age of ten. After graduating with a degree in Art
History, Martha became a Wall Street stockbroker.
Later she began a catering service, which was soon diversified in to
range of kitchen and garden services eventually making her name
synonymous with stylish living. Martha Stewart was legendry for her
attention to detail even fretting about things like the shape of the
coffee pot on her televised shows. She undoubtedly worked very hard for
One of Martha’s good friends was Samuel Waksal, the CEO of the
Biotech company Imclone Systems. Waksal was arrested for insider dealing
on the allegation that he tipped his family and friends of the Federal
Drug Administration’s (FDA) refusal to review Imclone’s application for
the cancer treatment drug, Erbitux. Waksal had sold 200,000 shares of
the company held by him.
Martha had only about 4000 shares in Imclone, which she sold. When
questioned she pointed out that she had left instructions with her
stockbroker to sell these shares if they went below $60. The value of
shares held by Martha Stewart in Imclone was only a fraction of her
total assets. Despite her explanation the troubles that began for her
did not go away. Martha eventually had to serve a term of imprisonment.
Although free now, her image as an American icon has suffered
If we were to adopt these standards in assessing insider influence in
our stock market we will probably find armies of Waksals and Marthas
presently going about Colombo without a care in the world. Such is the
reality of our private sector even in the mind of a person like Ranil
We can perhaps agree with him when he says that on the balance, the
economically powerful giver is more culpable than the financially
hard-pressed receiver. Whether we have the political will and the
personal qualities required to fight the scourge of corruption remains
to be seen. But if we are serious about it, corruption has to be fought
in all sectors and against both the receiver as well as the giver.