Hijacking Bankers to Catch Swindlers Won't Work
India’s efforts to prevent corporate plunder will unfairly disadvantage the likes of Citigroup and HSBC.
Foreign banks may be a victim of socialist overkill in India.
Photographer: Dhiraj Singh/BloombergCorporate chicanery appears in multiple forms and with unfailing regularity: think Enron Corp. or Wirecard AG. What bedevils capitalism in India is the propensity of some investors to cheat all other stakeholders.
In good times, “promoters” — as controlling shareholders are known in local law — puff up project costs and award contracts to related parties, draining profits away from the company. The extraordinary effort that entrepreneurs put in to beat the country’s legendary red tape provides, at least in some minds, a justification for helping themselves to an outsize share of the spoils. A highly opaque system of election financing gives politicians a stake in perpetuating the status quo.