DAILY EDITORIAL DISCUSSION AND ANALYSIS(23rd March)

 Corporate Governance/ Ethics (GS 3 & GS 4)

Going Beyond Shareholder Wealth (Business Line, 23^rd March 2022)

Author: – Arun Maira

Reformed Capitalism

• Capitalism must be reformed to enable more equitable, socially responsible, and environmentally sustainable economic growth.
• Why is that even good human beings, with good values, when they are CEOs become tacitly complicit in the bad actions of companies?
• Why do even good companies that we admire for their high standards sometimes do bad things?
• The irony is that “best managed” companies are gauged from the perspectives of investors and stock markets only.

Accountability of Companies

• The first rung is accountability to investors and lenders — the domain of finance, corporate accounting, auditing, corporate law, and stock market regulators.
• The second rung is accountability to the direct participants in the business’s processes for financial value creation —customers, employees & Vendors.
• Third is accountability for the effect of business operations on the physical environment.
• Fourth is effect of the business’s products and processes on the lives of people — their health, their education, their values.
• Lastly is accountability for the political health of the societies in which businesses operate i.e. human rights & fair democratic practices

Concerns Arising

• Businesses have a selfish concern to make laws easier for them to do business and make profits.
• Often it is perceived that the role of business in society is to run profitable operations and create value for shareholders.
• Freedom for businesses, and minimum government, this became the dominant paradigm since the 1990s.
• Realisation is dawning that everyone, including businesses, must act to improve the ‘commons’ they all share.
• Businesses must also share the natural environment, as well as the quality of society including human rights and justice.

 

 

Corporate Power

• Corporations have much larger resources to hire lawyers and lobby governments to promote their interests.
• Some corporations are financially larger than many countries.
• Corporations have become more equal in reality than ordinary human.
• With rights, should corporations not have responsibilities, like every citizen, for building a good society?
• Societies need new scorecards to measure the worthiness of businesses.
• And business leaders need new yardsticks to measure societal values.
•  The business of business remains the making of money.

Way Forward

• CEOs MUST change their company’s DNA, to conform with the ideals of “conscious” capitalism or “green” capitalism.
• Unfortunately, even if they want to they cannot go too far because their boards and they are legally enjoined to account to their shareholders only.
• The legally mandated structures of corporations must change to enable companies to release the compassions of their leaders and their employees.
• All companies must be mandated to report to society as rigorously as they account to their shareholder.

 

International Organizations (GS 2)

Case Against Russia (Indian Express, 23^rd March 2022)

Author: – Prabhash Ranjan

Context

• The ICJ the principal judicial organ of the UN has ordered Russia to immediately suspend its military operations in Ukraine.
• This decision of far-reaching significance was rendered by the ICJ in response to Ukraine’s application for indication of provisional measures under Article 41 of the ICJ Statute
• Ukraine moved the ICJ against Russia accusing it of falsely claiming that Ukrainians are committing genocide in their territory.
• Ukraine believes that Russia is using this untruthful premise to start an illegal war.
• As per Ukraine this breaches its rights under the Genocide Convention — a treaty that is binding to both Russia and Ukraine.

Genocide Convention

• The Convention on the Prevention and Punishment of the Crime of Genocide (Genocide Convention) is an instrument of international law that codified for the first time the crime of genocide.
• The Genocide Convention was the first human rights treaty adopted by the UNGA on 9 December 1948.
• This signified the international community’s commitment to ‘never again’ after the atrocities committed during the Second World War.
• Genocide is a crime that can take place both in time of war as well as in time of peace

Member states to Genocide Convention

 

ICJ’s Reasoning

• Court held that it had prima facie jurisdiction in the case because the subject matter fell under the Genocide Convention.
• Russia contended that it’s formal basis for use of force against Ukraine was its right to self-defense under Article 51 of the UN Charter.
• Since 2014, Russia has been repeatedly accusing Ukraine of committing genocide in the Donetsk and Luhansk regions.
• As per ICJ Prima facie, this shows the existence of a “dispute” under Article IX of the Genocide Convention .
• Hence the reasoning is that this bestows jurisdiction on the ICJ.

Reading the Judgement

• While the court did not decide on whether Russia has breached the Genocide Convention, as this is a question of merits.
• ICJ did express doubt over whether a country can unilaterally use force against another country for punishing or preventing an alleged act of genocide.
• This indicates that Russia’s use of force is difficult to justify under the Genocide Convention.
• ICJ held that if it does not indicate provisional measures, that is, order cessation of military action.
• Then there is a real and imminent risk of irreparable harm to Ukraine’s rights.

Conclusion

• ICJ’s decision is binding on Russia and constitutes part of its international legal obligations.
• If Russia continues its military actions, it will be a brazen violation of international law. 
• Cynics argue that none of this matters because the remedy for not complying with ICJ rulings lies with the UNSC.
• But just because populist leaders like Vladimir Putin don’t care for international law does not diminish its significance.

 

Access to Essential Medicines (The Hindu, 23^rd March 2022)

Author: – Biswajit Dhar & K. M. Gopakumar

Context

• At the height of the COVID-19 pandemic in October 2020, India and South Africa had tabled a proposal in the WTO.
• They were seeking a temporary waiver over the availability of affordable vaccines, medicines and other medical products.
• Nearly 18 months later, 164 members of the WTO could not find common ground on the “waiver proposal”.
• Even as 63 developing countries have become co-sponsors of the proposal.
• Initially, all advanced countries opposed the proposal.
• However after Biden Administration took over, USA backed the waiver BUT only for Vaccines.
• As of today, only 14% of people in low-income countries have received at least one vaccine dose.

EU Solution

• While opposing the concept of “waiver” of application and enforcement of IPRs, the EU had proposed in a submission in June 2021.
• Compulsory licenses are a perfectly legitimate tool that governments may wish to use in the context of a pandemic.
• Surprising to find that three of the four “Quad” members, who have been supporting the waiver proposal all this while.
• Even they have diluted their stand and have accepted the EU’s proposal as the “compromise outcome”.

On Licences

• Generally, patent laws, including that of India’s, allow for the grant of compulsory licenses.
• That is in case if patent holders charge high prices on the proprietary medicines in exercise of their monopoly right.
• Such licenses can usually be granted if efforts in obtaining voluntary licences from the patent holders have failed.
• The “Quad” proposal states there that in case of a medical urgency, as is the case now, this condition will be waived.
• In other words, there is no requirement to make efforts to obtain voluntary licences with the patent holders before granting compulsory licences.

 

 

Devil Lies in The Detail- QUAD Solution

• The “Quad” solution can be used only by an “eligible member”, defined as a “developing country member” of the WTO.
• That Member that “had exported less than 10%” of world exports of COVID-19 vaccine doses in 2021.
• This eligibility condition seems to have been introduced to limit China’s expansion in the global vaccine market.
• The Reality is that China is not one of the countries that would benefit from the “Quad” solution.
• At the current juncture, India does not have to be concerned with the export restriction clause, as its share in global exports of vaccines was 2.4%.

Conclusion

• Compulsory licences may not result in the outcome that the waiver proponents were aiming for.
• According to the EU, when compulsory licences are granted, the “patent holder” receives adequate remuneration
• However, transfer of know-how is not ensured.
• This plain admission by the EU about the demerits of compulsory licences would make it difficult to scale up production of COVID-19 vaccine.
• Accepting the “compromise outcome”, India and South Africa could jeopardise their high moral ground which they had gained.
• Consequently, the global community would lose an important opportunity to ensure that vaccines and medicines are accessible to all.

 

Indigenization of Technology (GS 3)

Perfect Semiconductor Chip (Business Line, 23^rd March 2022)

Author: – Sanjay Gupta

Roadblocks to Chip Manufacturing

• It is not only the huge initial investment that acts as a bottleneck but the tenure to even reach break-even makes it unattractive for many players
• A single chip requires hundreds of liters of pure water, which may be difficult to come by in sufficient amounts in our topography
• One of the most important components of semiconductor manufacturing is a consistent and stable electrical supply.
• The process starts with a common material, like sand, and finishes with advanced circuitry made up of many transistor.
• The semiconductor industry works on separate steps like silicon plant, water fabrication, test, and assembly for developing a perfect chip.

Suggestion to Break the Barriers

Infrastructure

Power Semiconductors

• The Power Management Integrated Circuits (PMICs) and System Basis Chips (SBCs) help in developing designs for developing automotive, industrial, or consumer application.
• The integrated and cost-effective controllers will address a full range of AC-DC power conversion applications .

Barrier of Clean Energy

• India has been one of the fastest-growing solar PV markets in recent times.
• Out of the 10 largest solar plants under construction in 2018, five were spread across different States in India, making the country a prime market for efficient PV inverters.
• Gallium Nitride (GaN) and Silicon Carbide (SiC) based devices hold the key to addressing a primary hurdle for expansion of renewable energy.
• These provide scalable power conversion and storage solutions.

 

 

Requirement of Water

• Large quantities of water for a variety of purposes ranging from equipment cooling to wafer surface cleaning.
• Ultrapure water is required in these stages as it is used for surface cleaning.
• The conversion of raw water to water of ultrahigh purity is thus a significant and costly activity for all semiconductor fabs
• A typical 200 mm wafer fab that processes 20,000 wafers per month can use up to 3,000 m3 of UPW per day
• Government policies must focus on assuring and securing access to foreign technology suppliers.
• This requires calibration in trade and foreign policy 

Question From Editorial

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