BUSINESSWEEK
How do companies of the two countries compare when it comes to corruption?
Here, I am not positive on India at all. Transparency International puts out these indices, and India and China are both close to the bottom of that list. China does a little bit better than India. In China, there is corruption, but it is constructive corruption. You, as a bureaucrat, get to be corrupt but only after you generate some value for society. You get a piece of it. In India, there is corruption but it's not constructive. You're not fostering new bridges or highways. It's just shuffling stuff back and forth. I don't think we've cracked that in India at all. I'm very sorry about that.
In the final analysis, does it matter that Indian companies, on the whole, have an edge over the Chinese in reaching international standards of governance? The Chinese have huge capital at their disposal because of their $1.5 trillion in foreign exchange reserves. Couldn't they still be fearsome competitors?
I think that's right. Corporate governance matters because you want to reassure the providers of inputs—whether it's time and talent, or ideas, or capital—that their rights will be respected and they will get a return on it. But if you're already sitting on hundreds of billions of dollars of capital, and you don't need to reassure anybody else because you already have your capital, why have good corporate governance?
The reason the Chinese feel less pressured to do something about it is not because they don't know how to do it—far from it, they have the best technical help from Hong Kong and other places. It's because they make a reasoned judgment that it's not worth their while. Holstein is an independent business journalist and author in New York info@goliveideas4.com >> http://www.goliveideas4.com
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