Author(s) :

Sunaina Kanojia, Neha Sharma, Simmar Preet, Poonam Sethi, Jai Prakash Sharma.

Volume/Issue :

Abstract :

The present study aims to ascertain the factors which can impact the corporate political funding (CPF) decisions. It examines the perceptions of key managerial personnel (top management) about CPF gathered through a structured questionnaire. The focus of the study is to find out the antecedents to corporate political funding and analyse the perception of the top management which impacts CPF decisions. The study analyses the perception of the top management board of directors who make the decisions in the context of political funding using a structured questionnaire. Using Independent T-test, One-way Anova and OLS, the study attempts to explore various factors which impact managements' decision related to corporate political funding and indicate the most prominent amongst them. The study provides evidence towards motive behind the funding is the main antecedent to CPF decisions. For sufficient and transparent corporate funding in India, a balance is needed between public and private funding with transparent and precise criteria defining ceiling caps, disclosure and audit norms for enabling state contribution and private donations, which is absent as of now. The results from this study provide evidence that sectors which depend on Government policies or usage of restricted natural resources spend more on CPF. Companies from the sector of refinery, mineral and natural resources, real estate, followed by the manufacturing sector in India has emerged as the dominant Sector providing corporate political funding.It highlights that public funding should be encouraged to give all candidates a level playing field and reduce the influence of money in politics to reduce crony capitalism. It indicates the way forward in improving CPF related practices leading to a better governance environment.

No. of Downloads :

16

KEYWORDS:

Corporate Political Funding, Corporate Governance, Key Managerial Personnel, Funding Disclosures

INTRODUCTION & OBJECTIVES:

India is among the largest democracies in Asia which has a parliamentary system of government in place. The country's social and ethnic diversity has allowed many political parties which are actively involved in the democratic dispensation of the political process. While chasing the majority and power positions all political parties require funding for financing the functions of political parties, generally known as political finance or political funding and there are two predominant sources are state funding and private funding Sharma (2015). State funding in India has not yet taken concrete shape, and there is still a long way to go before state funding of political parties becomes a reality. However, political parties do get subsidies from the government during an election period. The primary source of revenue for the political parties is still private funding through membership fees and donations from individuals and corporations. When large donations are made to political parties by companies or other organisations, suspicions arise that the donations are made for reasons other than charity. When a donor makes donations to political parties of both sides, it may be a gesture of philanthropic support to the system of party politics or it may be an antithesis to the philosophy of donation. It has been observed that companies not having any competitive advantage create a sudden monopoly in the market majorly due to change of the rules of the game and those donor companies starts to attain benefits. Though, funding is essential for political parties but the suspicions arise when crony capitalism leads to erosion of public resources and adversely impacts the development of the nation. On one side the corporates are providing finance to the electoral system to fuel the country's democracy, and on the other hand, that system is eroding public wealth, and the country faces a dearth of infrastructure, absence of adequate education and scarcity of primary resources. Corporate contributions may not help the donating companies on an average to influence voting outcomes, but there is evidence that the funds raised by candidates help them win elections. The present study aims to examine the impact of varied factors – Industry Oriented Factors (Market capitalisation of the firm, Age of the firm, Size of operation of the firm, Sector of the firm), Corporate Governance Factors (Board of directors, Shareholder pattern, CEO duality, Disclosure practices) and possible solutions for more transparent CPF on the intention of political funding. Further, it unearths issues arising out of it, the role of corporate governance mechanisms and related laws in streamlining the process of corporate political funding in India. The purpose of the study is to look into the perception and intentions of corporate donors and attempt to develop a CPF structure which is more streamlined, transparent and has checks and balances in place to ensure its adherence in true spirit. OBJECTIVES OF THE STUDY Corporate political funding is an expression of social role of private sector whereby it gives resources to political parties to fulfil their role of giving democratic voice of people a representation. In an ideal scenario the funding given to political parties should rest on transparent parameters which make it a just and fair process. It may happen that the funding work as the background of some expected future policy or no hidden interest of the companies other than altruistic purpose is attached with the funding. In fact the spate of scandals and scam and the broken public trust have left leaves us is doubt that no such ideal scenario exists. Or to the contrary, it indicates towards emergence of crony capitalism as a practice of today’s time which has skewed political corporate funding in favour for particular party or candidate; driven primarily by the desire for quid pro quo. The focus of the study is to find out how the perception of the top management who are in charge of financial decisions impacts CPF decisions and how it can pave the way forward in improving CPF related practices leading to a better governance environment. This is needed to streamline and make the corporate political funding process more democratic, transparent and equitable to enable a more level playing field for democratic elections. 1. To extract the factors which impact corporate political funding in India and provide evidence therefor. 2. To analyse the perception of key managerial personnel on extracted factors and corporate political funding across firm characteristics. 3. To study the perception of key managerial personnel on how industrial factors, corporate governance factors and solutions proposed for improved CPF have an impact on company’s intention of making corporate political funding when each sub group factor is analysed independently and simultaneously. The following hypotheses have been considered to collate evidence in the context of the research problem formulated above. H01: There is no significant difference in intention of KMP towards CPF on the basis of firm’s characteristics and demographics of the KMP. H02: There is no relationship between the intention of KMP towards CPF and motive, mode of doing it, impact of CPF on society and the nature of the firm. H03: The intentions of KMP towards CPF and ownership pattern, Corporate Governance mechanism, CEO duality, independence of the Board of directors is not significant. H04: There is no significant relationship between the intention of KMP towards CPF, Government regulation and possible solutions for transparent funding.

DOI:

10.58426/cgi.v2.i2.2020.31-62