Legality versus morality

Recently, there have been some commentaries on legality versus morality. The Securities and Exchange Board of India Chairman Ajay Tyagi bemoaned that the regulator and independent directors have failed to mitigate the influence of promoters. Law and morality are often not aligned. Apart from regulations, we must consider the difficult perspective of character versus morality by exploring “behavioural corporate governance”.

Thomas Jefferson had said, “A code of ethics may be violated in moments of passion or delusion, yet it furnishes a text to which those who are watchful may again rally and recall the team.” Last week, the police chief of Norway fined the Norwegian prime minister 20,000 Norwegian crowns for violating the government’s covid ban on large gatherings, though the law did not provide for such a fine! Can you imagine this happening in India?

Board directors must not only have a judicial temperament, but also a sense of what is fair. Humility is difficult to teach. Events teach humility through humiliation! Confronting the dilemma of law versus ethics distinguishes exemplary corporate governance from just following the rules.

Society views morality through several lenses — culture, leaders’ behaviour, and the justice system (police, legal processes, and courts). For example, top political leaders participate in crowded election rallies that breach the rules that they advocate. Gandhiji placed great value to morality in addition to law.

The Emergency lasted from 1975 to 1977 after getting certain approvals. However, the people have long felt that the Emergency was not moral. After 45 long years— in December 2020 — the Supreme Court has agreed to examine the Constitutional validity of the Emergency.

The Farmers Bills were passed without parliamentary debate and after flouting established procedures. They received the required approvals in one-fifths of the average time for other Bills. The Supreme Court may uphold their legality whenever the pending disputes are heard. But public doubt will remain whether democratic process was subverted.

Indian Space Research Organisation  scientist and Padma Bhushan awardee, S Nambi Narayanan, was humiliated through a fake spy case right in the prime of his career. How he must have suffered!

Twenty five years ago, based on my own self-disclosure, Sebi started and kept a spurious case of insider trading pending for six years, after which I received a 13-page report that no evidence was found of insider trading. Naturally, I was miffed at the unfairness.

In Fractured Freedom, Kobad Ghandy describes the miserable conditions in various jails that he occupied during his recent 10-year incarceration. The citizen wonders whether India’s prisoners 75 years after Independence suffer as grievously as what Veer Savarkar had to endure in the colonial jail.

The balance between law and morality will always invite attention. Citizens expect justice to adhere to both law and morality. Courts pass judgments sometimes by restricting to legal issues, and at other times, by invoking both law and morality. How is the common citizen supposed to react?

People perceive the current justice system as unfair or inhuman. Who is to fix it? “Broken windows” is a criminological theory wherein common residents assume that somebody will fix a broken window without knowing who. It is laughable that our law minister could seriously suggest that India could be a global centre for arbitration and mediation, when the citizen feels disgusted by the system’s inability to deliver domestic justice. Justice suffers from the broken windows syndrome.

A theory of justice must include ways of determining how to reduce injustice as much as ways of advancing justice. Adapting a quote from Charles Dickens’ Great Expectations “…...in the little world in which common people have their existence, nothing is so finely felt as injustice…. It may be only a small injustice that the citizen is exposed to, but the citizen is a small person, and his world is small….”

Closing with corporate governance, the Supreme Court has judged that a substantial minority shareholder in a company cannot demand a board seat without the concurrence of the majority shareholder. What happens if that minority shareholder is a legal inheritor of the shares but suffers unilateral exclusion from the reported promoter group? Reflect on the cases of Yes Bank and the Murugappa group. Think of the case of United Breweries, where Vijay Mallya continued as non-executive chairman due to an undisclosed legal agreement with the major shareholder, even while he was fugitive from Indian law.

Board directors are people of public stature and accomplishment. They can develop and exhibit wisdom, maybe even become exemplars for society. Independent directors should at least try to balance morality and law.

The writer is a best-selling author and corporate advisor. He was Director of Tata Sons and Vice Chairman of Hindustan Unilever. rgopal@themindworks.me