Source lemonade, not lemons
When Duvvuri Subbarao bid farewell to a 4-decade career spanning administration and banking regulation, he was clear about what he won't do: pick up any assignment in the private sector. Why? Potential conflict of interest, and possible dilution of stature. He was an exception in a community that hardly gives up power and perks that come along with it.
In an era when demands on corporation compliance are increasing by the day, and navigating administrative obstacles is getting more complex, there's need for a master of the system. Who better suited than a retired bureaucrat or a regulator, a person who has been designing the very system all his life?
The approach has served some companies well. Others have complained how it's becoming difficult to pander to demands of people who expect the same treatment they received when in service.
Atanu Chakraborty's abrupt exit as part-time chairman of HDFC Bank, saying the institution was not in sync with his 'personal values and ethics', and RBI declaring all is well makes one wonder wherein lies the truth. Former IAS officer R Gopalan's role in the boardroom battle in Sundaram-Clayton doesn't paint a rosy picture. These episodes raise the question: should bureaucrats, regulators, even judicial officers get into active corporate roles post-retirement?
There's little substitute for wisdom these professionals acquire and bring to the table. That knowledge needs to be utilised for institutional betterment. The question is: how?
In structure and scope, state administration and companies are at opposite ends of the spectrum. While one is driven by the need to evolve policies that benefit larger sections of society without discrimination, companies are driven by the need to maximise profits for shareholders and management that gains from stock prices.
The two are incompatible. But what brings them together is need. While companies want a navigator, the administrator looks not only to use his acquired knowledge productively, but also to keep the cash registers ringing. The problem begins when intentions of the company in hiring a retired bureaucrat is beyond just wisdom. Often, managements are looking to ex-officials to 'open doors'. When the motive is to influence, it invariably leads to compromise in values. This not only weakens the individual but also dents the cadre's reputation.
Whether bureaucracy, regulatory body or judiciary, it is a hierarchical system where seniority dictates terms, not sheer merit. Those involved in policymaking can't help but see their former bosses/colleagues through the prism of seniority.
While many demands may be just, the very presence of a former powerful official on the other side complicates decision-making. Sometimes, it's embarrassing, not just making life uncomfortable for those in service but also for those who 'cross over' putting their reputation on the line - who are often kept in the dark about what's actually happening in companies they've just joined.
Few could question the integrity of former Sebi chief M Damodaran. But queries have been raised about his role as a director in some companies that didn't match his own standards of governance. Recently, when IndiGo's parent InterGlobe Enterprises sought to reappoint him to the board, proxy firms questioned his role when the company had been penalised by Sebi for lapses. He had to face similar questions in his role as a director at S Kumars Nationwide.
Such events are prone to happen because large companies are so sprawling that it's impossible for a board member to keep track of everything, and some acts may be of negligence, not by design. But reputational damage to both individual and institution he once served is real.
So, is there a workaround? Instead of identifying themselves with organisations whose true colours they may not be aware of, bureaucrats aspiring to utilise their expertise should set up advisory companies. This would work better than being attached to a company and exposing themselves to the risk of being painted in the same brush as an unscrupulous management.
Corporations that seek their inputs can pay the market price for hiring them as independent advisers, rather than taking them on board. The latter often turns into a headache, as pampering some egos takes up more time and energy than running the company effectively.
The resulting engagement between private sector and former officials will bring out the real need for such services and the right price. It could expose which company wants to use them for their insights, and which ones for 'influence'. Since that requires voluntary action - which may not always be forthcoming - service rules could be amended to bar direct engagement even if it is in a non-executive role.
In an era when demands on corporation compliance are increasing by the day, and navigating administrative obstacles is getting more complex, there's need for a master of the system. Who better suited than a retired bureaucrat or a regulator, a person who has been designing the very system all his life?
The approach has served some companies well. Others have complained how it's becoming difficult to pander to demands of people who expect the same treatment they received when in service.
Atanu Chakraborty's abrupt exit as part-time chairman of HDFC Bank, saying the institution was not in sync with his 'personal values and ethics', and RBI declaring all is well makes one wonder wherein lies the truth. Former IAS officer R Gopalan's role in the boardroom battle in Sundaram-Clayton doesn't paint a rosy picture. These episodes raise the question: should bureaucrats, regulators, even judicial officers get into active corporate roles post-retirement?
There's little substitute for wisdom these professionals acquire and bring to the table. That knowledge needs to be utilised for institutional betterment. The question is: how?
In structure and scope, state administration and companies are at opposite ends of the spectrum. While one is driven by the need to evolve policies that benefit larger sections of society without discrimination, companies are driven by the need to maximise profits for shareholders and management that gains from stock prices.
The two are incompatible. But what brings them together is need. While companies want a navigator, the administrator looks not only to use his acquired knowledge productively, but also to keep the cash registers ringing. The problem begins when intentions of the company in hiring a retired bureaucrat is beyond just wisdom. Often, managements are looking to ex-officials to 'open doors'. When the motive is to influence, it invariably leads to compromise in values. This not only weakens the individual but also dents the cadre's reputation.
Whether bureaucracy, regulatory body or judiciary, it is a hierarchical system where seniority dictates terms, not sheer merit. Those involved in policymaking can't help but see their former bosses/colleagues through the prism of seniority.
While many demands may be just, the very presence of a former powerful official on the other side complicates decision-making. Sometimes, it's embarrassing, not just making life uncomfortable for those in service but also for those who 'cross over' putting their reputation on the line - who are often kept in the dark about what's actually happening in companies they've just joined.
Few could question the integrity of former Sebi chief M Damodaran. But queries have been raised about his role as a director in some companies that didn't match his own standards of governance. Recently, when IndiGo's parent InterGlobe Enterprises sought to reappoint him to the board, proxy firms questioned his role when the company had been penalised by Sebi for lapses. He had to face similar questions in his role as a director at S Kumars Nationwide.
Such events are prone to happen because large companies are so sprawling that it's impossible for a board member to keep track of everything, and some acts may be of negligence, not by design. But reputational damage to both individual and institution he once served is real.
So, is there a workaround? Instead of identifying themselves with organisations whose true colours they may not be aware of, bureaucrats aspiring to utilise their expertise should set up advisory companies. This would work better than being attached to a company and exposing themselves to the risk of being painted in the same brush as an unscrupulous management.
Corporations that seek their inputs can pay the market price for hiring them as independent advisers, rather than taking them on board. The latter often turns into a headache, as pampering some egos takes up more time and energy than running the company effectively.
The resulting engagement between private sector and former officials will bring out the real need for such services and the right price. It could expose which company wants to use them for their insights, and which ones for 'influence'. Since that requires voluntary action - which may not always be forthcoming - service rules could be amended to bar direct engagement even if it is in a non-executive role.
MC Govardhana Rangan
The author writes on financial markets and public policy.