Business

World Bank’s latest action kicks off huge controversy

CHENNAI: World Bank has debarred Bangalore based-Wipro Technologies and Hyderabad-based Megasoft Consultants from receiving any contract from it.

The World Bank announcement comes within less than three weeks after it publicly declared that it had banned Satyam Computer Services from working with them.

Monday’s announcement comes in the wake of the World Bank Group’s decision to make public the names of all companies that have been debarred from receiving direct contracts from the Bank Group under its corporate procurement programme.

There are at present three Indian companies that have been debarred along with their affiliates. Satyam Computer Services has been debarred for eight years for allegedly providing improper benefits to the Bank’s staff and failing to maintain documentation to support fees charged for its sub-contractors. Wipro Technologies is barred for four years for providing improper benefits to the Bank’s staff and Megasoft Consultants for a like period for participating in a joint venture with the World Bank staff while also conducting business with the Bank.

But why is the Bank announcing it now, though it had debarred these firms way back in 2007?

The issue of corporate governance is applicable to both the parties. The disclosure should have come from both the ends. Why did Wipro and Megasoft not disclose the fact that they have been debarred by World Bank two years ago? There seems to be complete lack of adherence to disclosure norms.

Coming as it does close on the heels of Satyam episode, which has raised serious questions on corporate governance and disclosures, the World Bank announcement on the ban has kicked off a huge controversy.

In 1999, the Securities and Exchange Board of India had appointed Kumar Mangalam Birla to report on the Corporate Governance. “Good corporate governance casts an obligation on the management in respect of disclosures. The timely disclosure of material and price sensitive information, including details of all material events, will have a bearing on the performance of the company,” the report said.

“The Committee, therefore, recommends that disclosures must be made by the management to the board relating to all material, financial and commercial transactions, where they have personal interest, that may have a potential conflict with the interest of the company at large (dealing in company shares and commercial dealings with bodies, which have shareholding of management and their relatives),” the report said.

Wipro officials say the revenue from the World Bank is ‘insignificant’. They don’t anticipate the ban affecting other contracts of Wipro.

“It has said that the Wipro share purchase by the World Bank staff didn’t violate any ethics or result in conflict of interest.” Similarly G. V. Kumar, Managing Director and Chief Executive Officer, Megasoft, asserted that “his company has had no business from World Bank since 2004 and, hence, there is no financial impact on the company due to this announcement.”

The timing of the World Bank announcement of the ban on these Indian firms has come under flak.

Why did the bank not make this public way back in 2007 itself when it had debarred these firms?

Though the Bank has come out with a list of debarred firms across the globe, the late and untimely disclosure vis-À-vis the Indian firms has caused considerable consternation among the captains of India Inc.

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