Indian IT companies averse to political donations

NEW DELHI: While Indian companies are lobbying the government to keep political donations a secret because they don't want to face the risk of victimisation, the country's $110-billion information technology services business appears to have completely skirted what looks like building up into a contentious issue. They say they don't give anybody any money, and have good reason not to.

India's new Companies Act requires firms to disclose names of political parties they give money to in the interests of transparency. The Confederation of Indian Industry lobby group says this leaves them vulnerable to governments formed by parties that haven't got money from them or perhaps received less cash than rivals.

The IT business has been held up as a symbol of a modern India that has created more millionaires than any other sector in recent years. However, IT firms, business service providers and other new economy companies avoid funding parties for technical and business reasons, which includes most of their clients being overseas. By contrast, American technology companies are among the top funders of parties, with Microsoft among the 10 that give the most.

Oracle founder Larry Ellison, Microsoft's outgoing CEO Steve Ballmer and the chiefs of Yahoo, AOL, Google and Salesforce.com have funded both Republicans and Democrats. In the last US campaign, Ballmer personally gave $39,500 to the Democrats and $32,500 to the Republicans.

The clarity sought by the Companies Act will make political funding clearer as 75-80% of the money that goes to parties in India comes from unknown sources, said Ajit Ranade, founder of the Association for Democratic Reforms (ADR), an advocacy group for electoral reforms. "So we can't say which company is participating," he said.

Meanwhile, IT companies that are also listed in the US, such as Infosys and Wipro, are covered by that country's Foreign Corrupt Practices Act (FCPA), which would require full disclosure on any such funding anywhere in the world, including India.

It's understandable that companies don't want to disclose who they fund.

"Compounded with that, campaign finance is a vexing issue as politics by nature is partisan," Ranade said. "It is not like sponsoring a sporting event, where you move on after the event. Politics is a continuum and companies might hesitate to take sides." Companies listed in the US have to disclose payments made to government officials, politicians and political parties, in line with the FCPA, which the US enacted in 1977.

"Transparent, open funding to political parties is new to India, it's part of the new Companies Bill," said S Gopalakrishnan, vice chairman of Infosys. "We don't know whether any company is currently funding political parties. Open funding will happen if rules require this and all political parties disclose all their funding sources." Even if IT companies want to fund elections, the global spread of their business makes this difficult, they say.

"Political funding is open enough and we can donate. But we don't as we are a global company with operations in 100 countries and offices in 44 countries. For us to get into this (political funding) will be a 44-country decision and not a single-country decision," said Shiv Nadar, HCL Group chairman. That gives such companies a good reason not to get involved in the messy business of political contributions, said an executive at a lobby group who didn't want to be named.

"IT companies are not working for the Indian market. They don't have to draw favours from the local market and neither did they evolve from the licence-permit raj era. So the driver to fund political parties is not there," the person said.

To be sure, any change in the nature of their business could see an alteration in this stand. Such as "if IT companies are sought for drawing up technology manifestoes of political parties or even if the local market becomes significant," the person said. Right now, less than 12% of the IT business comes from the local market.

  "The influence of policy on IT is not high and that's why the aversion to funding," said Neel Ratan, executive director, eGov, PricewaterhouseCoopers (PwC) India.

"The inherent strength of IT services companies has been people and not politics."

Mohandas Pai, chairman of Manipal Global Education and former board member of Infosys, is in favour of IT companies and others funding political parties openly, as this will make for a less murky system. "Political parties need funds to run," he said. "It will be good for democracy if clean money comes in.

Corruption and candidates with questionable credentials in politics can be traced to black money in politics. Best way to clean up is start funding openly—by both old and new economy firms." Kiran Karnik, an independent strategy and policy analyst and a former head of the Nasscom grouping of IT companies, said there were two options before the sector.