Should the Big Four accountancy firms be split up?

Natasha Landell-Mills and Jim Peterson in The Financial Times

Yes - Separating audit from consulting would prevent conflicts of interest.

Auditors are failing investors. The situation has become so dire that last week the head of the UK’s accounting watchdog said it was time to consider forcing audit firms to divest their substantial and lucrative consulting work, writes Natasha Landell-Mills. 

This shift from the Financial Reporting Council, which opposed the idea six years ago, is welcome. But breaking up the Big Four accountancy firms — PwC, KPMG, EY and Deloitte — can only be a first step. Lasting reform depends on auditors working for shareholders, not management. 

Auditors are supposed to underpin trust in financial markets. Major stock markets require listed companies to hire auditors to verify their accounts, providing reassurance to shareholders that material matters have been inspected and their capital is protected. In the UK, auditors must certify that the published numbers give a “true and fair view” of circumstances and income; that they have been prepared in accordance with accounting standards; and that they comply with company law. 

But audit is failing to meet investors’ expectations. The failure of Carillion, linked to aggressive accounting, is just the latest high profile example. And this is not just a UK phenomenon. The International Forum of Independent Audit Regulators found that 40 per cent of the audits it inspected were sub-standard. 

Multiple market failures need to be addressed. The most obvious problem is that audit quality is invisible to those whom it is intended to benefit: the shareholders. It is difficult to differentiate good and bad audits. Even with the introduction of extended auditor reports in the UK (and starting in 2019 in the US), formulaic notes about audit risks often hide more than they convey. 

Even when questions are raised about the quality of audits, shareholders almost always vote to retain auditors, with most receiving at least 95 per cent support. Last year, 97 per cent of Carillion shareholders voted to re-appoint KPMG. Lack of scrutiny creates space for conflicts of interest. Auditors who feel accountable to company executives rather than shareholders will be less likely to challenge them. These conflicts are exacerbated when audit firms also sell other services to management teams, particularly if that consultancy work is more profitable. 

The dominance of the Big Four in large company audits is another concern: when large and powerful firms are able to crowd out high quality competitors, the damage is lasting. 

Taken together, these failures have resulted in a dysfunctional audit market that needs a broad revamp. Splitting audit from consulting would prevent the most insidious conflict of interest. When non-audit work makes up around 80 per cent of fee income for the Big Four (and just over half of income from audit clients), the influence of this part of the business is huge. 

Current limits on consulting work have not eliminated this problem. They are often set too high or can be gamed, while auditors can still be influenced by the hope of winning non-audit work after they relinquish the audit mandate. 

There is quite simply no compelling reason why shareholders should accept these conflicts and the resulting risks to audit quality introduced by non-audit work. But other reforms are necessary. 

Auditors should provide meaningful disclosures about the risks they uncover. They need to verify that company accounts do not overstate performance and capital and that unrealised profits are disclosed. 

Engagement between shareholders and audit committees and auditors should become the norm, not the exception. Shareholders need to scrutinise accounting and audit performance, and use their votes to remove auditors or audit committee directors where performance is substandard. 

Finally, the accounting watchdogs must be far more robust on audit quality and impose meaningful sanctions. Even the best intentioned will struggle against a broken system. 


No — Lopping off advisory services would hurt performance 

The recent spate of large-scale corporate accounting scandals is deeply worrying and raises a familiar question: “Where were the auditors?” But the correct answer does not involve breaking up the four professional services firms that dominate auditing, writes Jim Peterson. 

Forcing Deloitte, EY, KPMG and PwC to shed their non-audit businesses would neither add competition nor boost smaller competitors. Lopping off the Big Four’s consulting and advisory services would degrade their performance, weaken them financially, and hamper their ability to meet the needs of their clients and the capital markets. 

Although the UK regulator is raising competition concerns, the root problem is global. The growth of the Big Four, operating in more than 100 countries, reflects their multinational clients’ needs for breadth of geographic presence and specialised industry expertise. 

 The yawning gap in size between the Big Four and their smaller peers has long since grown beyond closure: even the smallest, KPMG, took in $26.4bn in 2017, three times as much as BDO, its next nearest competitor. If pressed, risk managers of the smaller firms admit to lacking the skills and the risk tolerance even to consider bidding to audit a far-flung multinational. 

The suggestion that competition and choice would be increased by splitting up the Big Four is doubly unrealistic. Forcing them to spin off their non-auditing business would not create any new auditors. We would continue to see dilemmas like the one faced by BT last year when it set out to replace PwC after a £530m discrepancy was uncovered in the accounts of its Italian division. The UK telecoms group ended up picking KPMG for want of alternatives, even though BT’s chairman had previously been global chairman of KPMG. 

Similarly, Japan’s Toshiba tossed EY in favour of PwC in 2016, only to suffer disagreements with the second firm — this led to delays in its financial statements and an eventual qualified audit report. Wish as it might, Toshiba has no further choices, because of business-based conflicts on the part of Deloitte and KPMG. 

A split by industry sector — say, assigning auditing of banking and technology to Firm A-1, while manufacturing and energy go to new Firm A-2 — would be no better. Each sector would still be served by just four big firms. If each firm were split in half, the two smaller firms would struggle to amass the expertise, personnel and capital necessary to provide the level of service that big companies expect. 

Splitting auditing from advisory work is a solution in search of a problem. Many jurisdictions, including the UK, EU and US, restrict the ability of firms to cross-sell other services to their audit clients. Concerns about inherent conflicts of interest are overblown. 

The enthusiasm for cutting up the Big Four also fails to recognise how the world is changing. The rise of artificial intelligence, blockchain and robotics is reshaping the way information is gathered and verified. Auditors will need more — rather than less — expertise. 

Warehouse inventories, crop yields and wind farms will soon be surveyed rapidly and comprehensively in ways that could easily displace the tedious and partial sampling done for decades by squadrons of young audit staff. But to take advantage of these advances, auditors need to have the scale, the financial strength and the technical skills to develop and offer them. 

These tools will also deliver data that management needs for operational and strategic decision making. If auditors are to be barred from providing this kind of advisory work, the legitimacy of methods that have prevailed since the Victorian era is under threat. Investors will require some sort of audit function, but who would provide it? Splitting up the Big Four will achieve nothing if they fail and are replaced by arms of Amazon and Google. 

Auditors should be held accountable for their mistakes, but these issues are too complex for simplistic solutions. Rather than a quick amputation, we need a full-scale re-engineering of the current model with all of its parts.

Accounting watchdogs find ‘serious problems’ at 40% of audits

Madison Marriage in The Financial Times


Global accounting watchdogs identified serious problems at 40 per cent of the audits they inspected last year, raising fresh concerns about the quality of work being carried out by the world’s largest accounting firms. 

According to the International Forum of Independent Audit Regulators, accounting lapses were identified at two-fifths of the 918 audits of listed public interest entities they inspected last year. 

The audit inspections focused on organisations in riskier or complex situations such as mergers or acquisitions, according to the IFIAR, whose members include 52 audit regulators around the world. 

The most common issue identified by these regulators was a failure among auditors to “assess the reasonableness of assumptions”. 

The second biggest problem was a failure among auditors to “sufficiently test the accuracy and completeness of data or reports produced by management”. 

The findings have intensified concerns about weaknesses in the auditing process, an issue that has been thrust into the spotlight over the past 12 months following a string of high profile accounting failures. 

These include the collapse of BHS and Carillion in the UK, a corruption scandal involving oil company Petrobras in Brazil, and the share price collapse of South Africa’s Steinhoff after the retail conglomerate admitted to a series of accounting irregularities last year. 

Prem Sikka, an accounting expert and emeritus professor at Essex University, said the frequency of problems identified by the IFIAR was “terrible”. 

“There are a whole range of issues and there is no simple fix. There is a huge knowledge failure in the audit industry which is not being looked at. The whole industry is ripe for reform. The question is where is the political will for this?” 

The accounting industry has faced significant reputational problems in the UK in particular. KPMG came under heavy criticism from politicians last year for giving HBOS a clean bill of health shortly before the UK bank collapsed during the financial crisis. KPMG has also been criticised for declaring Carillion a going concern last March, 10 months before the construction company went into liquidation. 

The report showed that 41 per cent of the problems identified by audit regulators last year related to independence and ethics. These included accounting firms failing to maintain their independence due to financial relationships with clients, and failing to evaluate the extent of non-audit and audit services provided to clients. 

Many firms also failed “to implement a reliable system for tracking business relationships, audit firm financial interests, and corporate family trees”, the IFIAR said. Its research was based on feedback from 33 audit regulators who inspected the work done by 120 audit firms. 

Karthik Ramanna, a professor at Oxford university’s Blavatnik School of Government, said the number of firms with issues around independence and ethics was “absurdly high”. He added that the research would reinforce concerns about a lack of competition in the audit market, which is widely viewed as being dominated by the ‘Big Four’: EY, Deloitte, KPMG and PwC. 

“The auditing industry is so concentrated, once the largest firms set the standard for poor conduct, the whole industry is dragged down,” he said. 

Brian Hunt, chairman of the IFIAR, told the FT: “We would like the firms to focus on getting better. We need them to think about how they come at this a bit differently. The firms are making progress — we would like to see it happen a bit faster.” 

Deloitte said: “We remain focused on continually improving the quality of services we provide to our clients. We look forward to continuing our constructive engagement with our audit regulators.”

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BCCI, Katju and Cricket in India

Suhrith Parthasarathy in The Hindu

The Board of Control for Cricket in India’s decision last week to appoint a former Supreme Court judge, Justice Markandey Katju, to “interact with the Justice Lodha Committee” and to “advise and guide” the BCCI on its affairs is, at best, an effort at prevarication, and, at worst, a subversion of the Supreme Court’s authority. Exacerbating the tension, following his appointment, Justice Katju, rather indecorously given his stature as a retired judge, on August 6 released what he termed as a “first report,” with “more reports to follow,” in which he declared the Supreme Court’s judgment appointing the Lodha Committee as illegal and unconstitutional.

It is one thing to critique the court’s judgment as an outsider; for instance, it is plausible to argue, even if incorrectly, that the court ought to have exercised greater restraint in interfering with the board’s affairs. But to do as Justice Katju has, to advise a party to openly disregard the Supreme Court’s verdict, presents a dangerous proposition, one that is far more threatening than any act of judicial overreach. What’s more, in any event, given the peculiar facts and circumstances surrounding the BCCI’s structure, Justice Katju’s assertion that the court has exceeded its brief also fails to pass muster. If anything, these developments exemplify precisely why the Supreme Court’s intervention in this case was justified.

Why we play sport

To understand why the Supreme Court thought it fit to appoint the committee presided by the former Chief Justice of India, R.M. Lodha, to inquire into, and to recommend changes, to the BCCI’s organisation, we must confront a few fundamental questions. Too often, amid the chaotic world of modern sport, we tend to lose track of why we play sport, why we watch games, why we revel in them, and why we invest so much of our emotions into seemingly pointless pursuits. We must first ask ourselves, therefore, what the abiding purpose of cricket is. What do we want from it? Is the sport meant for pure entertainment? Can it be commercially exploited by a band of the elite owing no responsibility to the public? Or do we want the sport to represent a higher, more virtuous purpose? If so, how are we to achieve these ends?

To take any sport seriously, and to ask such questions, seems to represent, in some ways, an incongruity in terms. In fact, many commentators considered the adjudication of the dispute concerning the BCCI and allegations of spot-fixing as a waste of the Supreme Court’s precious time. The public, they warned, was according more importance to cricket than it really deserved. But the danger, contrary to such counsel, is not that we are taking sport too seriously. It is that we are not taking sport seriously enough.

As the American academic, Jan Boxill, has argued, sport serves to establish a moral function for society. It is “an unalienated activity which is required for self-development, self-expression, and self-respect”; or, put differently, it is morally important because it is “the art of the people,” one that ought to be included in what Marx termed as the “realm of freedom”. In India, where cricket plays such a pervasive role, the sport would therefore have to necessarily be seen as a primary cultural good, one which, to borrow from another American, the philosopher John Rawls, is critical to the fulfilment of a person’s conception of a good life. In that sense, access to cricket has to be considered as an end in and of itself, and as not in any manner subservient to some other veiled purpose, especially entertainment or business. In his marvellous epic, Beyond a Boundary, C.L.R. James argued that cricket allows us a grasp of a more complete human existence, where social justice is a legitimate aim. To seize ownership of the game we must, therefore, hold cricket’s administrators answerable to standards of public law, a check that would help in bringing about within cricket’s province a more equal distribution of resources.

When it sat in judgment over the various shenanigans of the BCCI and its management of the Indian Premier League (IPL), the Supreme Court recognised some of these values inherent in cricket. For years, ever since its inception, the BCCI had functioned as its own master, as a sovereign whose diktats were decisive and unquestionable. As this dominion began to extend beyond India into a global clout, the inability to hold the board publicly accountable became graver still. Governments came and went, but legislative intervention has never been on the horizon.

A private society?

Until the Supreme Court intervened last year, every time the courts were approached, judges too vacillated, as the board bandied about its customary defence, one that Justice Katju has also invoked in his report: that the board is merely a private society, to which conventional standards of public law are simply inapplicable. Indeed, the BCCI, which was originally formed in 1928 as an unregistered association of persons, is now enrolled as a private body, under the Tamil Nadu Societies Registration Act of 1975. Today, more than 30 members, including public sector undertakings such as the Railways and the Services, subscribe to the board’s Memorandum of Association, which includes, among its objects, the promotion and control of the game of cricket in India, the encouragement of the formation of State and regional cricket associations, and, most significantly, the selection of the Indian national cricket team.

At first blush, the BCCI’s argument might appear to make sense. Traditionally, private societies are responsible only to their members, and it is for these clubs to determine for themselves what best represent the interest of their associates. Therefore, for any of the board’s decisions to stand the law’s scruples, all that is required is the concurrence of its members, which is to be secured through a procedure that the memorandum provides. When people outside the BCCI’s membership enter into independent relationships with the board — such as employment contracts or purchase of TV rights — those relationships would also, according to the board, remain purely in the realm of private law.

Yet, before the Supreme Court intervened last year, the BCCI, emboldened by this status as a supposed private body, consistently diluted the underlying values in cricket, viewing these as somehow inferior to the board’s grand project of commercially exploiting the sport. When, for instance, incidents of conflicts of interest within the board have been questioned, the board’s arguments proceeded on these lines: if the BCCI’s members are satisfied that a person who owned an IPL team could also contest and hold office as the board’s president, the courts, including the Supreme Court, simply lacked the authority to judicially review such decisions.

But in its judgment, delivered on January 22, 2015, which resonated amongst cricket fans around the world, the Supreme Court rebuffed these arguments. Not only did it haul up the BCCI and question the body’s standards of governance but it also explicitly ruled that the board was amenable to public scrutiny. “Such is the passion for this game in this country that cricketers are seen as icons by youngsters, middle aged and the old alike,” wrote Justice T.S. Thakur (now Chief Justice of India) on behalf of the court. “Any organisation or entity that has such pervasive control over the game and its affairs and such powers as can make dreams end up in smoke or come true cannot be said to be undertaking any private activity.”

A clear purpose

Or in other words, what the court was really telling us is this: that cricket is a basic good, the access to which is critical to the fulfilment of a good life. When the court appointed the Lodha Committee, its intention, therefore, was to create a structure through which the sport can be made more accessible and more equal. The committee’s report, which was released on January 4, 2016, seeks to do just this. It recommends, among other things, that each Indian State would only be entitled to a single vote within the BCCI, a mandate that is likely to damage a coterie of power held by Maharashtra and Gujarat that have three associations each. What’s more, it directs the establishment of an apex council of nine members, overseen by a reputable chief executive officer, comprising three independent persons, with two from a newly constituted “players’ association”, and at least one woman, to conduct the day-to-day administration of the sport in the country; the institution of lucid norms within the BCCI’s constitution to regulate conflicts of interest, including the reduction in involvement from politicians; and, most critically, a more reasonable division, if not a complete separation, between the BCCI and the IPL.

The argument today, made in Justice Katju’s report, is that any change to the BCCI’s structure must come either from within or through legislative intervention. But neither of these, as history tells us, is conceivable. In bringing about a change in the board’s structure through the Lodha Committee’s recommendations, the Supreme Court isn’t making law. It is merely making accountable a body that enjoys a virtually state-sanctioned monopoly, which allows it to alter the fundamental nature of a property that it holds in trust for the public. It is astounding that the board would object to these recommendations, for all they do is establish a basic framework for good governance.

In the final analysis, we must ask ourselves this: do we want to see cricket as constituting an end by itself, as a sport that is both ethically and morally significant? If the answer to this question is yes, we must not only cause the BCCI to embrace the Lodha Committee’s recommendations but also push towards an even more revolutionary process of reform; one through which the game can eventually be brought closer to the common Indian public, where the sport’s ownership is reclaimed from those who have tarnished it beyond recognition.

Criminal bankers have brazenly milked the system. Let’s change it

Will Hutton in The Guardian

 

 Traders colluded in online chatrooms to time the buying and selling of huge amounts of currency. Photograph: Ruben Sprich/REUTERS

The world’s biggest banks had been steeling themselves for months before the US Department of Justice’s rulings on manipulation in the foreign exchange markets. Last week’s announcement was, if anything, less tough than expected; £3.7bn of fines were levied on top of those announced last autumn, to bring the grand total to an astounding £6.3bn. Crucially, the banks also admitted that what they had done was criminal. The US attorney general, Loretta Lynch, declared that foreign exchange traders had exhibited“breathtaking flagrancy” in setting up a group they called “the cartel” to manipulate the market between 2007 and the end of 2013. The fine was “commensurate with the pervasive harm done. And it should deter competitors in the future from chasing profits without regard to fairness, to the law, or to the public welfare”.


Put bluntly, the world’s most prestigious banks had brazenly and systematically ripped off their clients. It was the crime of the decade. Yet the markets had been expecting worse. Only a month ago, Deutsche Bank had paid a record £1.6bn fine for manipulating and rigging prices in the currency and money markets. If this was the benchmark, thought the markets, the fines for other banks would be higher. As it was, £3.7bn seemed almost modest and the share prices of Barclays, RBS, Citigroup and JP Morgan rose sharply in relief.

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The hope in the banking world is that the worst may be over. The combination of modestly increased regulation, stronger internal compliance and clawing back pay and bonuses if there has been malpractice – together with genuine determination at board level to root out criminal practice in dealing rooms – should begin to make a difference.


Yet will it be enough? Our grandparents, less in hock to today’s ruling doctrines – that markets can be presumed to be infallible and egoism is always beneficial – were wiser about how to organise markets than today’s economists and regulators. It is striking, despite record fines and the sacking of the Bank of England’s head of foreign exchange operations, who knew about the collusion but never drew it to the authority’s attention (on the grounds that whistleblowing was not part of his duties), that the British approach is still softly, softly.


Minouche Shafik, deputy governor of the Bank of England, expressed her horror at the casual “misconduct” among traders and the language they used to justify what they did in a speech to the London School of Economics last autumn. (Shafik is in charge of the fair and effective market review that will propose changes to the foreign exchange markets.) She conceded that no one can talk any more of a few bad apples – the barrel is rotten. But while recognising that deep change was necessary, her proposed areas for potential remedial action are largely technical. Tonally, her comments reminded me of the infamous Bischoff report into the banking system in 2008/9, which, despite the narrowly averted banking collapse, recommended as little as possible should be done to reform the City.


In fairness, Shafik spoke before last week’s admissions of criminality. The US Justice Department has raised the stakes. What everyone has to confront is that the banks have been party to an organised, global criminal conspiracy to defraud their clients. Traders colluded in secret online chatrooms to time the buying and selling of huge amounts of foreign currency to benefit each other. As one said: “If you ain’t cheating, you ain’t trying.” The entire framework, and the economic philosophy that supported it, has been found wanting.


In terms of structure, the foreign exchange markets are the closest to a Thatcherite nirvana that has ever been devised. Governments do not manage rates to comply with an internationally agreed system, as they did after the war. The price of a pivotal financial asset is determined wholly by private supply and demand. The market makes its rules. There has been close to zero public regulation. Banks buy and sell on their account freely and for their clients. Conflicts of interest abound. The pursuit of profit is the only hallowed value.


The argument in favour of this is that it is vital for the promotion of world trade and prosperity, but daily turnover on the foreign exchange markets dwarfs the volume of world trade. To paraphrase Adair Turner when chair of the now-abolished Financial Services Authority, much of this turnover is plainly neither socially useful nor promotes public welfare. It does, however, enrich those who trade in it and, as we see, criminally.


For 30 years, the doctrine has been that state involvement would be counterproductive. Modern companies, of which banks are a sub-set, have been encouraged to define themselves not as organisations delivering economic and social good, but as profit-making machines for anonymous, tourist shareholders. Managers did not question their trading teams too hard: they knew how important the profit was to their bonuses and to the bank. As for the teams, they were prepared to trade themselves – moving from bank to bank, depending on whoever paid them best. They were not an integral part of great organisation: they were, and are, boys on the make.


In a letter to all the CEOs of Fortune 500 companies, Larry Fink, head of BlackRock Asset Management, the biggest in the world, deplored the short-term financial priorities of modern corporations, which he said had lost their way and urged a refocusing. What has happened in our currency dealing rooms is part of that story. Addressing it requires a new deal between shareholders, companies and their workforces, and between the public and the private. We need a reshaping of company law and the way companies are owned so that managers pursue less fevered, short-term amoral strategies. And we need an acceptance that in market after market there is a co-dependence between state and business.


Rather than imposing swingeing fines after the event, the state has an obligation to create, with the banks, a financial architecture in which such practices cannot happen. Conflicts of interest and opportunities for price rigging should be outlawed. Criminal currency traders should be prosecuted All bonuses should be capable of being clawed back. Currency trading should be licensed on organised, accountable exchanges.


Those rules and systems that the world’s free marketeers considered so antediluvian turn out to be wise and friendly to honest-to-god businesses. Mark Carney’s Bank of England has been quietly re-regulating mortgage finance, abandoning the free-market zealotry of the 1980s and 1990s. It should do the same in the foreign exchange markets. Our grandparents were not so stupid after all.

Why did Britain’s political class buy into the Tories’ economic fairytale?

Falling wages, savage cuts and sham employment expose the recovery as bogus. Without a new vision we’re heading for social conflict

• 
• • Ha-Joon Chang
  • The Guardian, Sunday 19 October 2014 17.46 BST

Demonstrators among tens of thousands who protested about austerity in London on Saturday. Photograph: Mary Turner/Getty Images

The UK economy has been in difficulty since the 2008 financial crisis. Tough spending decisions have been needed to put it on the path to recovery because of the huge budget deficit left behind by the last irresponsible Labour government, showering its supporters with social benefit spending. Thanks to the coalition holding its nerve amid the clamour against cuts, the economy has finally recovered. True, wages have yet to make up the lost ground, but it is at least a “job-rich” recovery, allowing people to stand on their own feet rather than relying on state handouts.

That is the Conservative party’s narrative on the UK economy, and a large proportion of the British voting public has bought into it. They say they trust the Conservatives more than Labour by a big margin when it comes to economic management. And it’s not just the voting public. Even the Labour party has come to subscribe to this narrative and tried to match, if not outdo, the Conservatives in pledging continued austerity. The trouble is that when you hold it up to the light this narrative is so full of holes it looks like a piece of Swiss cheese.

First, let’s look at the origins of the deficit. Contrary to the Conservative portrayal of it as a spendthrift party, Labour kept the budget in balance averaged over its first six years in office between 1997 and 2002. Between 2003 and 2007 the deficit rose, but at 3.2% of GDP a year it was manageable.

More importantly, this rise in the deficit between 2003 and 2007 was not due to increased welfare spending. According to data from the Office for National Statistics, social benefit spending as a proportion of GDP was more or less constant at about 9.5% of GDP a year during this period. The dramatic climb in budget deficit from there to the average of 10.7% in 2009-2010 was mostly a consequence of the recession caused by the financial crisis.

First, the recession reduced government revenue by the equivalent of 2.4% of GDP – from 42.1% to 39.7% – between 2008 and 2009-10. Second, it raised social spending (social benefit plus health spending). Economic downturn automatically increases spending on many social benefits, such as unemployment benefit and income support, but it also increases spending on things like disability benefit and healthcare, as increased unemployment and poverty lead to more physical and mental health problems. In 2009-10, at the height of the recession, UK public social spending rose by the equivalent of 3.2% of GDP compared with its 2008 level (from 21.8% to 24%).

When you add together the recession-triggered fall in tax revenue and rise in social spending, they amount to 5.6% of GDP – almost the same as the rise in the deficit between 2008 and 2009-10 (5.7% of GDP). Even though some of the rise in social spending was due to factors other than the recession, such as an ageing population, it would be safe to say that much of the rise in deficit can be explained by the recession itself, rather than Labour’s economic mismanagement.

When faced with this, supporters of the Tory narrative would say, “OK, but however it was caused, we had to control the deficit because we can’t live beyond our means and accumulate debt”. This is a pre-modern, quasi-religious view of debt. Whether debt is a bad thing or not depends on what the money is used for. After all, the coalition has made students run up huge debts for their university education on the grounds that their heightened earning power will make them better off even after they pay back their loans.

The same reasoning should be applied to government debt. For example, when private sector demand collapses, as in the 2008 crisis, the government “living beyond its means” in the short run may actually reduce public debt faster in the long run, by speeding up economic recovery and thereby more quickly raising tax revenues and lowering social spending. If the increased government debt is accounted for by spending on projects that raise productivity – infrastructure, R&D, training and early learning programmes for disadvantaged children – the reduction in public debt in the long run will be even larger.

Against this, the advocates of the Conservative narrative may retort that the proof of the pudding is in the eating, and that the recovery is the best proof that the government’s economic strategy has worked. But has the UK economy really fully recovered? We keep hearing that national income is higher than at the pre-crisis peak of the first quarter of 2008. However, in the meantime the population has grown by 3.5 million (from 60.5 million to 64 million), and in per capita terms UK income is still 3.4% less than it was six years ago. And this is even before we talk about the highly uneven nature of the recovery, in which real wages have fallen by 10% while people at the top have increased their shares of wealth.

But can we not at least say that the recovery has been “jobs-rich”, creating 1.8m positions between 2011 and 2014? The trouble with this is that, apart from the fact that the current unemployment rate of 6% is nothing to be proud of, many of the newly created jobs are of very poor quality.

The ranks of workers in “time-related unemployment”, doing fewer hours than they wish due to a lack of availability of work – have swollen dramatically. Between 1998 and 2005, only about 1.9% of workers were in such a position; by 2012-13 the figure was 8%.

Then there is the extraordinary increase in self-employment. Its share of total employment, whose historical norm (1984-2007) was 12.6%, now stands at an unprecedented 15%. With no evidence of a sudden burst of entrepreneurial energy among Britons, we may conclude that many are in self-employment out of necessity or even desperation. Even though surveys show that most newly self-employed people say it is their preference, the fact that these workers have experienced a far greater collapse in earnings than employees – 20% against 6% between 2006-07 and 2011-12, according to the Resolution Foundation – suggests that they have few alternatives, not that they are budding entrepreneurs going places.

So, in between the people in underemployment (6.1% of employment) and the precarious newly self-employed (2.4%), 8.5% of British people in work (or 2.6 million people) are in jobs that do not fully utilise their abilities – call that semi-unemployment, if you will.

The success of the Conservative economic narrative has allowed the coalition to pursue a destructive and unfair economic strategy, which has generated only a bogus recovery largely based on government-fuelled asset bubbles in real estate and finance, with stagnant productivity, falling wages, millions of people in precarious jobs, and savage welfare cuts.

The country is in desperate need of a counter narrative that shifts the terms of debate. A government budget should be understood not just in terms of bookkeeping but also of demand management, national cohesion and productivity growth. Jobs and wages should not be seen simply as a matter of people being “worth” (or not) what they get, but of better utilising human potential and of providing decent and dignified livelihoods. Ways have to be found to generate economic growth based on rising productivity rather than the continuous blowing of asset bubbles.

Without a new economic vision incorporating these dimensions, Britain will continue on its path of stagnation, financial instability and social conflict.

What's behind team spirit?

Martin Crowe in Cricinfo

New Zealand gelled as a team int he 1992 World Cup but splintered thereafter © Getty Images

Teamwork, team spirit, team culture, team dynamics - all buzzwords that point to the same thing. Yet in truth it is the team "functionability" that must work if success is to be achieved and a legacy created. Sports teams are no different to business teams, except sport is played out in public and each individual player is under scrutiny, as much as the team's performance is.

In reality, most teams fail, if winning a championship or event or being ranked No. 1 is the measure they are judged by. Those few fortunate enough to hold the trophy aloft, let alone do it often and frequently, like the once all-conquering Manchester United, or the Australian cricket team of yesteryear, they are the ones that come together as one. As d'Artagnan famously said, "All for one and one for all."

There are thousands of opinions, hundreds of books, case studies and manuals on the subject worldwide. There are many ways to skin a cat. Yet really, when all is said and done, it is the simple methods of how people function best in everyday life that need to be executed in a sporting team environment. It comes down to how our relationships work in any form of life, and this points always to the ability to love, to talk, to listen and to commit. In short, to relate.

In my years of experiencing the good and the bad in relationships and teams, studying others, reading lots, and hearing grand and sad stories in all kinds of endeavour, the one thing that stands out more than anything is building and maintaining trust.

Trust stems from a willingness to openly share anything and everything. It is about not being afraid to show vulnerability, admitting mistakes and weaknesses, and generally and genuinely sharing the truth outwardly and honestly among the group. Trust rules the lot.

When it is not built, or is broken, then the essence of the team's functionality is lost. Great leaders and captains have been able to rely on this trust, once established, as the cornerstone to team success.

	Australia have always had the ability to work together even if one or two of the personalities clashed

Ian Chappell, the great Australian captain, would easily speak his mind, using his open-door policy style, by buying his team-mates a beer and sitting them down at the bar, loosening them up a little and getting a natural flow of conversation bedded in. He was famous for building that trust within his all-conquering team of the '70s by simply using straight honest talking and listening. In this he helped create the environment to challenge and debate with each other.

This is incredibly healthy, the key being that the trust generated leads to open challenging discussions and passionate debate based on respect. It doesn't mean you have to hold hands when doing so, just simply to speak your truth "out in the open", be heard, and take time to listen in turn. The worst thing is to speak your truth behind the backs of the team, in particular to the media and opposition. This kills trust, and it kills the desire to continue to share. Once trust and openness are broken, there is no chance going forward.

If the first two are working well, it will go a long way to solving any commitment issues. Committing or buying into the team's work is about the desire to go to great lengths to perform your specialist role for your team's benefit. When team members are allowed to share the truth, there is a natural tendency to buy in to committing wholeheartedly to the decisions made by the team's leaders.

Without commitment there is no accountability. When all are in, it becomes easier to call team members on actions and behaviours that will assist the team cause. When accountability becomes understood, then so too is the need to focus attention to the goals and results of the team. Accountability removes the individual needs, like personal recognition and ego, from the equation.

Australia had a great handle on this with their dominance through most of the 1990s and much of the following decade. They have always had that ability to work together even if one or two of the personalities clashed. This was the open positive conflict working well. West Indies, under Clive Lloyd, showed a real theme to their togetherness, small nations becoming one, and they displayed a spirit unrivalled for 15 long years.

Through the '80s, New Zealand had a mixture of good and bad, but mainly positive functionality. Sometimes there was a lack of attention to team results and accountability, but overall there was an enduring trust, openness and commitment.

	West Indies, under Clive Lloyd, showed a real theme to their togetherness - small nations becoming one © PA Photos  Enlarge

In my term as a Test captain, I didn't allow for enough open debate and sharing, and so we had little trust to start with, and the rest of the dysfunctions followed. My failure was in not generating enough open conflict to ensure everyone had a say, bought in, and truly committed. However, it did come slowly, so by the time of the 1992 World Cup, we had nearly all five functions working smoothly.

Sadly, rather than building on that success, we splintered dramatically, the catalyst being the bomb blast outside our hotel in Colombo in late 1992, an incident that split the team in two when six players and the coach, with families at home, left the tour. From then, as a team, we were damaged goods. Administrators got involved, wrongly, and developed hideous resentment. Over just a few months all the trust we had garnered started to evaporate.

By February 1993, factions were everywhere and our team dynamic was dead. The coach, Wally Lees was sacked for very little reason. Mark Greatbatch was inexplicably replaced as vice-captain, and therefore I lost my trusted lieutenant, and before long, after just one more Test in charge, my tenure as skipper was over too. The team spirit suffered.

My last seven Tests, as a mere batsman not knowing how to retire, were the saddest of all that I played, as I watched a team pretend it existed. There wasn't one ounce of trust. That positive team dynamic never rose again for New Zealand until Stephen Fleming began his own team-building with a young bunch of mates and an experienced and inspirational management, from 1998 to 2003.

The point is, anything can disrupt the dynamic, and so it's vital that whatever happens, or whoever comes into the group, the five functions must be quickly and often referred to: Motivation for maintaining the flow of attention to results; accountability; commitment; open, honest and respectful conflict; and sharing truths - these make the lifeblood of a team's fulfilment and longevity.

The Need for Roots brought home the modern era's disconnection with the past and the loss of community

Having recently moved to a Himalayan village, I felt Simone Weil's focus on uprootedness spoke directly to me

• 
• • Pankaj Mishra
  • The Guardian, Sunday 18 August 2013 15.02 BST

An idol of the Hindu god Ganesh. ‘A rare European thinker who was as curious about Hindu and Buddhist traditions as about the Cathars, Weil despised colonialism as well as nationalism.’ Photograph: Sanjeev Gupta/EPA

There has rarely been a day since I first read The Need for Roots, nearly two decades ago, that I haven't thought of Simone Weil – one of my earliest heroines along with Hannah Arendt and Rosa Luxemburg. It was the title that initially attracted me more than the contents. Having recently moved to a Himalayan village after a peripatetic life in the plains, I had begun to feel rooted for the first time, connected to a stable community which, living off the land, neither poor nor rich, and low rather than upper caste, was marked above all by dignity – remarkable in a country where villages had become synonymous with destitution. And when Weil asserted that the central event of the modern era was uprootedness – the disconnection from the past and the loss of community – she seemed to speak directly to my experience.

The range of her admirers – from TS Eliot to Albert Camus – attest to the difficulty of describing Weil. She was a bourgeois Jewish intellectual from France who, in a viciously antisemitic climate, rejected both Judaism and Zionism. A youthful Marxist who fought on the Republican side in the Spanish civil war she, after an immersion in the "icy pandemonium of industrial life", came to believe that "it is not religion but revolution which is the opium of the people". A devoted Hellenist, she despised the Roman empire, implicating it with an oppressive tradition of the authoritarian state in Europe that culminated in Nazi Germany.

A rare European thinker who was as curious about Hindu and Buddhist traditions as about the Cathars, Weil despised colonialism as well as nationalism. "When one takes upon oneself, as France did in 1789, the function of thinking on behalf of the world, of defining justice for the world, one may not become an owner of human flesh and blood." She possessed an ironic view of historians – how they buttress the ideological claims of the hyper-power of the day: "If Germany, thanks to Hitler and his successors, were to enslave the European nations and destroy most of the treasures of their past, future historians would certainly pronounce that she had civilised Europe."

Freed of the popular intellectual's obligation to boost national or imperial egos, she could point out something that was obvious to many Asian sufferers of European colonialism: the shocking nature of Nazi racism lay, she wrote, "in the application by Germany to the European continent, and the white race, generally, of colonial methods of conquest and domination".

In The Need for Roots she distilled everything she had learned from her intellectual struggles with the ideologies of socialism and liberalism, her experience of working-class conditions and the plight of the Vietnamese in France.

In different ways, Marx, Nietzsche and Max Weber had described how human relationships had shifted dramatically in societies built around commerce, industrial capitalism and the colonisation of vast tracts of the world. Life had lost its old moorings in a world where technology greatly enhanced the power of large abstract entities, such as the state and nationalism. Weil brought a different intensity to this sober diagnosis of the human condition.

Uprootedness was a sickness of the soul, a spiritual malaise, but with far-reaching political consequences that left no one unaffected. As Weil wrote: "Hitler would be inconceivable without modern technique and the existence of millions of uprooted men."

Material affluence and political stability in recent decades has rendered less toxic the extensive deracination that began in Europe in the 19th century. Today, it is people from countries such as India, Iran and Egypt who will immediately recognise Weil's insight that the modern promise of individual development, which was realised through the destruction of old bonds, can leave people dangerously adrift and vulnerable to demagogues.

As the years passed in my village, I witnessed poorly educated young men leaving to seek the greater comforts and liberations of big cities. I would see them on my visits to Delhi. Working in sweatshops and living in equally degrading conditions, the promise of the modern world had turned sour for them. These were the men whose disaffection had traditionally seeded militant ideologies or random violence against those weaker than them.

Recent history shows that the social turmoil provoked by large-scale uprootings helps authoritarians more than progressives. In any case, revolution was both undesirable and unrealisable, since technology and industry were unstoppable. What, then, could be done?

Weil aimed at the rehumanisation of the workplace and, by extension, the larger society. As she put it somewhat melodramatically, a civilisation that did not recognise the spiritual nature of work was doomed.

This was not all abstract speculation. Policymakers can draw much from The Need for Roots: such clear prescriptions as that employers ought to provide an adequate vocational training for their employees, education should be compulsory and publicly funded, and include technical as well as elementary education.

But her most original move was to abandon the language of rights – the claims of possessive individuals against others that had provided political philosophy with its syntax since Hobbes and Locke. Instead, she talked of needs, duties and obligations as the basis of a good society – something that would be immediately familiar to Buddhist philosophers but remains marginal in the western tradition of political theory.

As she wrote, "If you say to someone who has ears to hear: 'What you are doing to me is not just', you may touch and awaken at its source the spirit of attention and love. But it is not the same with words like 'I have the right' … or 'you have no right to … ' They evoke a latent war and awaken the spirit of contention. To place the notion of rights at the centre of social conflicts is to inhibit any possible impulse of charity on both sides."

As she saw it, the original advocacy of rights had served the expansion of commerce and a contract-based society in western Europe. But a free and rooted society ought to consist of a web of moral obligations. We have the right to ignore them, but we ought to be actually obliged not to let other people starve, or to let them lapse into destitution.

It should be noted that Weil was not a liberal. For her, there can be no such thing as absolute freedom of expression at a time when "journalism becomes indistinguishable from organised lying", and its consumers don't have the time or leisure to sift truth from falsehood. "There ought to be," she wrote, looking ahead to the age of Leveson, special courts to monitor communications network that are "guilty of too frequent a distortion of the truth".

Indeed, what makes The Need for Roots particularly pertinent today is its critique of the ethic of liberalism that had originally emerged to serve the needs of a commercial society – individuals with highly self-regarding conceptions of their rights. As Weil saw, and we recognise very well in 2013, the extension of the marketplace into the realm of values has severely constrained our moral imagination.

It is easy to criticise some Weil's ideas for being too impractical and occasionally draconian. There is something too sanguine about her view of human nature. As a friend scolded her, shortly before she died of self-induced starvation in Kent in 1943 at the age of only 34: "Man is not pure but a 'sinner'. And the sinner must stink a bit, at the least." Perhaps. But you can only marvel, as Orwell did about Gandhi, at how clean a smell she managed to leave behind.

Indian cricket becomes a safe house of corruption

By PREM PANICKER | 1 July 2013

VIVEK BENDRE / THE HINDU ARCHIVES

Jagmohan Dalmiya (left), who, in 2006, was expelled for life from the BCCI for corruption, is now back in the organisation as its interim president.

 

IN NOVEMBER 2010, Anil Kumble, a legend of unquestioned personal integrity, retired from active cricket and got into cricket administration with the stated mission of bringing fairness, transparency and probity to the running of the sport. It transpired, however, that while serving as president of Karnataka’s state cricket association—putting him in a position to exercise control over players in the region—Kumble in his private capacity ran a player-management agency, and was thus also able to further the careers of players signed up with his firm.

When Kumble was asked about the conflicting interests inherent in this situation, this was his answer: “I don’t see any conflict of interest here … and I have to look after myself. At this stage of my career, I have to do that. Otherwise, you’d have to become like Gandhi and give up everything.” Implicit—no, explicit—in these words is a casual acceptance of self-interest and an equally casual dismissal of any motive beyond personal benefit.

The response passed without challenge, and so it should have. No statement is independent of context, and the context of Kumble’s words is the world created by the Board of Control for Cricket in India (BCCI)—ostensibly a not-for-profit organisation, but in real terms a body that has institutionalised, even sanctified, the single-minded pursuit of self-interest at all levels, even when such actions are in direct violation of the body’s own written constitution.

India’s cricket captain Mahendra Singh Dhoni is also known to have interests in a sports management firm. The clients of the firm are national cricketers, in whose selection and career prospects Dhoni has direct influence. If their careers blossom, he can benefit. The conflict of interest is glaring.

Shortly after Ravi Savant, the president of the Mumbai Cricket Association, was selected as the BCCI’s new treasurer last month—replacing Ajay Shirke, who resigned in protest over the board’s handling of the Indian Premier League spot-fixing scandal—he dared to point out the obvious. “Dhoni,” Sawant said, “should immediately dissociate himself from the management firm while he is captain.” Sawant further suggested that the captain’s contract with the board be examined, and that Dhoni be given notice of conflict of interest.

Within minutes, literally, of Sawant’s statement hitting the headlines, the board hierarchy lined up in repudiation. “Ravi Sawant was speaking in his personal capacity,” was the explanatory chorus. Interim president Jagmohan Dalmiya stated that the board had “taken note” of the reports—about time, too, given that the media has been talking of this for over four years—and would “look into it”.

“But we are not going to hound someone,” Dalmiya added.

Dalmiya’s cautionary codicil had the undertow of personal experience. In December 2006, the BCCI’s executive committee met to consider a report charging him with corruption and misappropriation of funds dating back to the 1996 World Cup. N Srinivasan, then the board treasurer, prosecuted the case. Dalmiya appeared in his own defense but was, in the words of an administrator present at the time, “shredded” by Srinivasan.

The board voted 29–2 in favor of punitive action and, in an official statement, said that Dalmiya had been “expelled from the board for life” and “barred from holding any position in any organs of the BCCI, including state associations.”

“I am being hounded,” Dalmiya said then.

The story has an interesting coda. In June 2007, the Calcutta High Court lifted the suspension on the grounds that the BCCI had filed a false affidavit, misled the court, and committed perjury. The core issue was a BCCI claim that Dalmiya had been suspended under a specific clause in the constitution. However, no such clause existed at the time. It was post-facto written into the constitution, and the amendment had not even been officially ratified when Justice Indira Banerjee heard the case and tossed the suspension on the ground that it was “illegal”. (Of course, it was only the suspension that was overturned, not the facts relating to the misappropriation itself.)

Cut to the board’s annual report of 2010–2011. The BCCI treasurer MP Pandove began his presentation of accounts with these words: “I feel the figures, like facts, are stubborn in character. Accordingly, I would like to take all members with me through the figures, which speak a thousand words, without saying.” Tucked into his accounting at the very end, just this side of an afterthought, was a particularly interesting item: “Reversal of Amount Recoverable from Mr Jagmohan Dalmiya—PILCOM/INDCOM/World Cup 1996 (Refer Note 7(b) of Schedule 15): ₹ 466,416,703.”

See what Pandove meant about figures speaking “a thousand words, without saying”? Dalmiya’s sins—the documented misappropriation of ₹46.64 crore (₹466.4 million)—had been forgiven, and the amount had been written off. It was a small price to pay to get Dalmiya to drop the many court actions he had launched against the BCCI. (To apply a few coats of irony to this story, Dalmiya has now come in to save his erstwhile prosecutor-in-chief, N Srinivasan—who stepped aside as BCCI president for a reputation-cleansing few months while a toothless inquiry pretends to investigate his tenure.)

When Dalmiya, after assuming the interim presidency, announced a programme of minor correctives that he dubbed “Operation Clean-Up”, here’s what was forgotten: the problem in cricket is not individual acts of corruption by a few naïve, greedy cricketers. Nor is it the casual acceptance of conflict of interest by otherwise upright men like Kumble and Dhoni. These are only symptoms of a far more invasive disease.

The problem is rooted in the fact that in the years since 1996, the BCCI perfected to a fine art the business of cricket, and brought unimaginable wealth into the sport, without any revision of operating procedures to guard against corruption. Thus means, opportunity, and the ability to rationalise aberrant behavior—the three classic elements of the fraud triangle—came together. And to this, the BCCI systematically added a fourth element as a safety net: over-arching political patronage.

THE PRESENCE OF POLITICIANS in the realm of cricket administration is not new. NKP Salve was board president from 1982 to 1985, while serving as minister in the Cabinet of then prime minister Indira Gandhi. A former club cricketer and first class umpire, Salve loved the game, so much so that Gandhi reportedly took him to task for spending more time on cricket than politics. “Madam,” Salve is said to have responded, “I am doing what I really love, and will gladly give up my Cabinet position to continue working for cricket.”

“The presence of politicians in cricket then was very necessary,” a senior administrator who made his bones during that time told me. “While the quality of Indian cricket was improving, there was absolutely no money in the sport. Politicians and public figures who were motivated by passion for the sport came in to try and save cricket from imminent bankruptcy.”

The turnaround began when Salve spearheaded the successful bid to bring the World Cup to India in 1987, and roped in Reliance Industries as sponsor. By 1996, when the BCCI led the bid to bring the World Cup to India, Pakistan and Sri Lanka, the board—under the leadership of Dalmiya and IS Bindra—had engineered a tectonic shift in the economics of Indian cricket. The Dalmiya-Bindra combine convinced ITC to come on board as title sponsors (it was known as “The Wills World Cup”) for a sum of approximately $10 million, they sold television rights for another $10 million, and monetised anything else their imagination could conceive. (Coca-Cola was “the official World Cup soft drink”.)

“Before the World Cup, politicians entered the game because there was no money,” the administrator quoted above said. “After the Cup, politicians entered the game because there was money.”

Until the mid 2000s, the grant given by the BCCI to state cricket associations was measured in lakhs. The lesser state bodies—the bottom feeders of the domestic competition, without a proper stadium and other facilities to their names—got between ₹ 15-25 lakh annually.

It was Lalit Kumar Modi who changed all that when, with the blessings of then BCCI president Sharad Pawar, he set out to monetise every aspect of cricket. It began in late 2005 when he signed up Nike as kit sponsor of the national team for a sum of $27.2 million, and reached its climax a year later when he sold television rights for the IPL to a Sony-World Sports Group consortium for $1.026 billion.

It was from that moment on that Indian cricket began valuing its worth in the billions—and as the money began to pour in, the BCCI brass put it to use to cement alliances, to buy silences.

So why are politicians so eager to run Indian cricket? Before we come to what happens to all that money, consider the case of Sharad Pawar, who does at least have some indirect affiliation with the sport—his late father-in-law Sadu Shinde was a Test cricketer of 1940s vintage. Before Pawar became president of the BCCI in 2005, his appearances in the national headlines usually involved famines, rising food prices, or farmer suicides. After 2005, he was transformed into cricket’s knight in shining armour—the man who saved the game from the clutches of the rapacious Dalmiya and who, through the IPL, gave the public a dazzling new circus where earlier he was vilified for not being able to provide bread.

And consider a few others: Rajiv Shukla, a one-time journalist with political ambitions, who used his clout as an Ambani insider to insinuate himself into the Uttar Pradesh Cricket Association and then into the BCCI. His ability to ingratiate himself with the influencers saw his elevation to the post of IPL Commissioner. Under his watch, the league was hit by spot-fixing scandals twice in two years and yet, the commissioner not only remained untouched, but managed to reinvent himself as the disinterested champion of clean cricket.

Then there is Arun Jaitley, a politician with ambition but no base, who for 13 years and counting has ruled over the Delhi and Districts Cricket Association despite serial scandals; Narendra Modi, who saw in cricket another oppotunity to remake his image; Lalu Prasad Yadav, the doting father of a son with cricketing ambitions, who took over the Bihar Cricket Association and used his clout to get Tejaswi Prasad Yadav gigs with the India Under-19 team and then with the Delhi IPL team.

The list has only expanded in recent years, with one association after another anointing a politician at its head. (As you read this, Pawar is readying for a second stint as Mumbai Cricket Association chief. Ask yourself why he would want a regional post after having headed both Indian and world cricket.)

The benefits of this political patronage inevitably flow even to those not actively involved in the sport. Through judicious use of the annual grants—which, thanks to lack of oversight, effectively become slush funds—the board and its state chapters are positioned to suborn almost anyone, any department, to their cause.

For starters, the annual grant to state associations, first raised to ₹ 8 crore (₹ 80 million) when Pawar took control, was more than doubled before the end of his tenure. From then on, you could run a state association with no major cricketing or talent-development activities or even infrastructure to speak of, and you would still get close to ₹ 20 crore (₹ 200 million) every year, regular as clockwork—without the burden of having to strictly account for how you spent the money.

If your association is influential, if your vote is crucial to the continuance in power of the entrenched brass, then this minimum grant is mere pin money. The powerful associations are allotted marquee games, and paid substantial sums for hosting them. The corresponding stick, that these games could not be allotted, is sufficient to bring recalcitrant associations into line. When Dalmiya’s fate was being decided in 2006, this implicit threat was enough to prompt even his own protégée Ranbir Singh Mahendra, who defeated Sharad Pawar in the board presidential elections in 2005, into voting against Dalmiya.

Associations also get to apply for ‘special grants’ that are routinely sanctioned; a particular favorite has been “stadium development”. Thus, if you control a state association and you play by the rules, you can run the tab as high as ₹ 60 crore (₹ 600 million) in a year.

These sums are not accounted for individually in the board’s annual reports, but bucketed under opaque and vague line entries such as “cricket development activities” and “establishment expenses”. Nor is this spending detailed in the reports of state cricket associations—in part because most don’t even file annual reports. Without itemised and detailed accounting, once the money is doled out to the states, there is no way for anyone to keep track of what happens to it, which may be exactly the point: by giving out such large sums with little or no oversight, the BCCI is tacitly buying the cooperation of the state associations. The state associations are effectively shielded from scrutiny—and in the unlikely event of a zealous governmental department poking its official nose into the finances, the board has sufficient political clout to ensure that such inquiries die still-born.

Instances abound. I’ll pick a lesser-known one as exemplar of how deep the rot extends.

In February 2010, the Ministry of Defence formalised the transfer of 15.3 acres of prime defence land to the Hyderabad Cricket Association without the mandatory approval of the President of India. The land, valued conservatively at upwards of ₹ 125 crore (₹ 1.25 billion), was handed over for a payment of just ₹ 1.88 crore (₹ 18.8 million) and an annual rent of ₹ 13 lakh. When the scam broke, a startled AK Antony, in his capacity as defence minister, was moved to order the Director General of Defence Estates to inquire into who within the ministry had so cavalierly handed over government property to a private body.

Oh, by the way—this grant, in two tranches of 5.71 and 9.59 acres, was first made in 1992. In February 1996, Prime Minister PV Narasimha Rao, who also held the defence portfolio, annulled this agreement with an official order, though no one acted to reclaim the land. Almost 17 years later, the defence ministry is still trying to figure out how the HCA held on to it all these years.

See what political patronage can do?

This is the real problem—one that Dalmiya’s “Operation Clean Up” does not even pretend to address: taking advantage of its self-proclaimed status as a “private body” (a fiction to which the board tenaciously clings despite repeated repudiation by the various courts in this land), the BCCI has created a moral safe-house where ‘everyone does it’ and therefore no one is to blame. 

Thus a Kumble, of unimpeachable personal character, can see nothing wrong in a clear conflict of interest; MS Dhoni, otherwise a young man of spine and integrity, sees a business opportunity in his elevation to the post of national cricket captain. The BCCI’s ultimate achievement is the creation of an environment no one can enter without being subsumed by the pervasive stench of corruption.

- See more at: http://caravanmagazine.in/perspectives/twirlymen?page=0,1#sthash.kf3ZRnIU.dpuf