Some time ago, finance secretary Montek Singh Ahluwalia was asked by businessmen to do something quickly to revive sagging stock markets, which have fallen to a three-year low. He replied that whenever he opened the newspapers in the morning, he read about yet another corporate scam. In such circumstances, he asked, was it surprising that investors were reluctant to entrust their money to the accused?
This is by no means the only reason for the market slump, but it is an important one. And it leads to an interesting question. Why, after all these years, have newspapers started reporting corporate scams? Businessmen were not angels in past decades. The malpractices filling today’s newspapers – excise evasion, foreign exchange violations, tactics to enrich the promoter at the expense of small shareholders – are as old as the hills. Yet there was virtually no reporting on these matters 20 years ago, and little reporting even five years ago. What has changed?
When I joined the profession three decades ago, I found it had an implicit caste system. The brahmins were the ones reporting on the Congress, the Prime Minister and External Affairs Ministry. Lower down came reporters covering other political parties. Lower still were those reporting on economic and social Ministries. And the bhangis at the bottom were the stock market reporters. I am told this was not true of Bombay, but it was certainly true of New Delhi, where I worked. The correspondents covering economic Ministries were horrified if anybody mistook them for stock market reporters.
Economic reporting in those days focussed overwhelmingly on government policies, five-year plans and the public sector. The few corporate reports were based mainly on hand-outs. Parliamentary debates overflowed with accusations of corporate profiteering, labour exploitation, and pre-emption of industrial licences, but these were socialist diatribes rather than corporate analysis.
I soon found that Editors discouraged corporate reporting. In 1968 Kamani Engineering became the first Indian company to export transmission equipment to the USA, which in those days was a great feat. I told my editor in The Indian Express we should highlight this in a feature. He hemmed and hawed, and finally said ‘Can’t you do it without mentioning the company’s name?’ This, of course, made the exercise pointless.
Why was the editor so reluctant? Because in those days any reporter praising a company was suspected of being in its pay. This seemed silly to me. After all, political reporters could praise politicians without omitting their names, and surely political reporters were as purchasable as economic ones. Still, that was the system.
Editors hated negative reports on companies too. The businessman you criticised might be an advertiser who would—withdraw his ads. Worse, he might be related by marriage to your proprietor. Editors found it unsafe to encourage critical appraisal, so corporate reporting languished.
Financial and corporate expertise were also in short supply. Wages in the profession were low, many had become journalists after failing to get employment as civil servants or teachers, many were promoted stenographers. They knew nothing of balance sheets, capital issues or management. Nor did they wish to, in case they were mistaken for stock market reporters.
Things changed with the coming of Business India and India Today. The proprietors of these magazines had no industrial empires to run, and were not related by marriage to big industrialists. They saw that the big newspapers had left a yawning gap in corporate reportage, and seized the chance to fill it. To begin with, their reportage was too friendly, almost hagiographic. But with time they began to assess and criticise companies more analytically. Gradually, this magazine culture spread to newspapers too.
By the 1990s, economic liberalisation took the private sector and stock markets to centre stage. New financial dailies proliferated, and every daily newspaper and TV network expanded its financial coverage. The demand for financial journalists rose phenomenally, driving up their wages. The old brahmins of journalism, the political and foreign affairs reporters, were mortified to find that suddenly the bhangis were getting the maximum pay. This was more than a social revolution. It meant that for the first time newspapers were paying enough to attract chartered accountants and MBAs. So the expertise within journals shot up, and journalists could now uncover and analyse malpractices which had been common but unreported for decades.
This, I believe, is an important reason why newspapers are full of corporate scams today. Other reasons are a more active CBI, Enforcement Directorate and SEBI. But the rise of corporate journalism has been vital too. Sucheta Dalal first exposed the stock market scam of 1992 in this newspaper: I doubt if any reporter would or could have done so a decade earlier. A stock market reporter (Sanjeev Sharma), no longer a bhangi but a star, exposed MS Shoes. ITC and the Tatas have been treated with far less deference and subjected to far more searching analysis than in the old days. The Escorts merger was exposed by Rajiv Goel, a reporter who happens to be a chartered accountant.
I call that real progress. But not all businessmen think so. Some blame adverse newspaper reporting for the stock market crash. Some blame me personally for helping kill the capital market. They say, ‘Are you not an owner of shares too? By carrying on like this, you are hurting not only business and the capital market but yourself.’
I have a short and a long answer. The short answer is that no respectable journalist should let his personal interest come in the way of his writing.
The long answer is that even my personal interest is well served by constructive criticism. My writings have an infinitesimal effect – the collective attitude of the press is what matters. Collective criticism of corporate misgovernance will, in the short run, push down the stock market (and my holdings too). But persistent constructive criticism will help reform business attitudes, improve accountability, and make businessmen more sensitive to shareholder needs. Once that happens, small investors will flock back to the market, which will then boom on a sustainable basis. In the short run may be a loser. But in the long run I will surely be a gainer, both as a citizen and shareholder.