• Subject Name : Economics

Introduction to Supply Contracts Due Diligence

Due diligence is in general defined as a measure of efficient and prudent execution of an action by a rational individual. In different areas, due diligence plays a similar role to perform a task meticulously. In business organisations, due diligence takes place majorly in the sales and purchase of goods and services or while acquisitions and mergers (Davies, et al., 2020). In this essay, the concept of due diligence will be discussed in detail. A comprehensive analysis of this concept and various ways in which due diligence was not observed in the case of compensation of the stolen statue, Dancing Shiva, to the National Gallery of Australia will be done. This essay also discusses the measures which should have been considered by the contract manager of purchase to prevent the current outcome. The importance of the role of museums and reputed institutions have been discussed to highlight their responsibility towards the society that can be achieved through following the concept of due diligence in making purchase or sale of an ancient artefact.

Case Study of “Dancing Shiva”

National Gallery of Australia is a major cultural collecting agency of international works of arts. The museum has many varied artefacts and is doing a tremendous job in promoting such artworks but along with this comes to a great responsibility to check the authentication of all of its items. The case considered in this essay is of the 900-year-old artefact, Dancing Shiva, which was allegedly stolen by Subhash Kapoor with the help of few locals from a temple in Tamil Nadu. This sculpture was then sold to the National Gallery of Australia for AUD 5.6 million (Art-Law Centre University of Geneva, 2015). Later, the theft was discovered by the locals who reported that sculpture to be stolen from a temple to the concerned authority. The documentation provided by the supplier was also proved to be falsified. The case went on for a few years and Kapoor was eventually found guilty. The Indian government requested the return of the statue which was approved in 2014 by Australian Tony Abbot. Now the Supreme court of New York has granted a motion to pay compensation to the National Gallery of Australia for the purchase of its stolen statue (Barker, 2016). The other artefacts brought by the Gallery from Kapoor also went under investigation. This entire controversy has gone on for years which was an outcome of one wrong decision in the purchase. The gallery faced a major loss financially because of this detrimental selection of the product. It has considered many practices of due diligence in making this purchase but it still lacked to follow the concept efficiently. This case reflects the failure of the organisation to follow due diligence practices in its dealings.

Due Diligence in NGA

The concept of due diligence is very crucial in making the purchase and sale of an ancient artefact. The reputed institutions and museums are more responsible in handling the issues relating to illegal trafficking of famous artefacts. A rigorous procedure needs to be followed to ensure the process of due diligence regarding the quality and provenance of the product. A comprehensive approach that requires a confirmatory and operational due diligence along with having a prudent post-transaction scheme makes the due diligent process complete. The failure of such due diligence process is observed in the case of stolen sculpture that was then sold to the National Gallery of Australia. The outcome of the above-described case has been an alarming situation for all such galleries and museums. It has highlighted the case of inefficiency and issues in the decisions of art museums. The concept of due diligence is not followed by concerned members of the gallery. For any organisation, it is very crucial to take into account all the factors before making a major decision of sale or purchase. According to the National Gallery of Australia (NGA) Director, all the necessary procedures were followed before acquiring the statue but it was probably not sufficient enough. There must be certain gaps between the administration of arts and the cultural material’s collection by Australia’s major institution. This is a clear case of institutional ignorance and lack of accountability by the administration (Jin, 2018).

There are different factors which include research limitations, practical aspects and social limitations that contributed to such a major scandal (Davies et al., 2020). There was a lack of background check on the supplier and the history of products purchased. The art crime of such illegal sale and purchase is not taken to be a serious issue and therefore is often neglected in museums. In this scenario, a misguided trust of the art supplier that was based on his erratic reputation was also a contribution to wrongful judgement by the contract manager. In direct response to the information regarding the illegal dealings of New York art dealer, the then director, Radford did dedicated research on histories of Asian, especially the Indian art collection (Folan, 2019). The similar in-depth research was not conducted before proceeding with the purchase of the artefact. 

The due diligence of this purchase lacked in various other factors. They claim to have conducted with due diligence but did not contact the police themselves and trusted on the guarantees and documents provided by the dealer. There was no prudent investigation and research on the sculpture. Also, NGA did not pay heed to their attorney’s concern about the risk factor associated with the purchase of this statue (Parikh, 2014). NGA’s proceedings with obtaining this particular artwork from Subhash Chandra has been critically expressed by Professor Chappell. He highlighted that being a major institution they did not perform the task with due diligence and should have been more sceptical about the product. According to him, purchasing any antiquities from India is in itself being in a dangerous position (ABC News, 2014). More cautious research and procedure for the accomplishment of the sculpture was expected by NGA. All these factors contributed to the non-compliance of the concept of due diligence in the purchase of the Indian sculpture.

The NGA was incautious to critically examine the documents provided by Kapoor who just had a vested financial interest and fraudulent characteristic. A journalist, Jason Felch also claimed that such due diligence conducted by NGA was shocking as they did nothing to verify the authenticity provided by Kapoor about the sculpture. This has seriously damaged the image of the National Gallery of Australia (Nicholson, 2014). Mr Radford however, has defended the process of due diligence followed by NGA. He claims that his staff did several checks of the locations provided by the supplier. This has come as a shock to him as well. Since the controversy, the NGA has tightened its strategies and practices. There have been allegations on Four corners for advising the purchase of the sculpture but they completely deny these allegations (ABC News, 2014). The expert of the Chola dynasty at Four Corners denies ever recommending any such purchase to the gallery. This has just created a blame game in this difficult situation. The lack of specific requirements leaves enough room for possible deniability and thereby puts a premium on not knowing.

Possible Ways to Avoid Similar Outcomes

There are various measures that as a contract manager, in charge of the purchase of the artefact, must have ensured to avoid such a major issue. There should have been a procedure beyond just paperwork and have an in-depth consideration of the present supplier's contract. Adequate assessment of the particular item should have been made to trace its history and not purchase in good faith. The place of origin or the earliest known history of the artefact is essential for accessing the channel of publication associated with the proceedings and having no incompetency in the transaction dealings (Neal, 2014). Instead of just relying on the documents and white pages, the historians specialized in these artefacts must be consulted by the contract manager before acquiring any piece of art. They have a keen understanding of the famous sculptures and can identify materials that belong to a specific place.

As a contract manager, it is important to take into consideration the concern of the organisation’s attorney very seriously regarding the risk factor associated with the purchase of this sculpture. The artefact related to some religious domain should be considered very critically before purchasing as it can cause a sentimental impact on the people worshipping the same. This is why Professor Chappell also critically expressed their incompetency in dealing with this transaction. The Arts Minister and Attorney General, George Brandis, also said that even though the due diligence standards of NGA are quite high, they did not compile it well in this specific event (Subramanian, 2016). Certain crime preventive measures should be a strategic priority to avoid the crime of this type. The contract manager should understand the outcome of a particular wrong decision to the reputation and financial status of the overall organisation.

There must be some specific suppliers from whom the artworks are to be purchased for display. Such suppliers must be selected after a holistic analysis of their work and only chosen as their supplier after rigorous authentication and scrutiny. The contract manager can also meet the potential supplier directly to have an understanding of their business works. A formalised ethical culture gives direction to foster the desired behaviour and supplier selection decisions (Goebel, Forstl & Reuter, 2012). A thorough procedure that goes beyond documentation and price comparison for the supplier selection decision in this respect can make a lot of difference. There could be a system of loaning instead of the traditional culture of owning to provide a long term remedy to this for the protection of cultural heritage. This would also avoid the black marketing of such precious artefacts (Davis et al., 2020). A greater degree of transparency and organisational amalgamation can improve the cultural heritage and maintain a higher level of ethics in the organisation. Therefore, it could be looked at a partnership approach to build a relationship with the supplier. The Gallery is now reconsidering its procedures of due diligence to avoid such outcomes in the future.

Conclusion on Supply Contracts Due Diligence

The concept of due diligence is the backbone of every important dealing taken in an organisation to avoid any such negative impact on the overall functioning. This would be a lesson for not only NGA but other reputed institutions and museums dealing with such artefacts to have due diligence with every purchase or sale of the product. In this essay, the ways by which the concept of due diligence was not followed by the organisation is highlighted. It can be observed that there are certain research and social limitations that contributed to this scandal. The organisation did conduct a basic analysis of the authenticity of the sculpture but it was only the paperwork scrutiny. There are many things to consider while purchasing such an expensive artefact from the supplier. A contract manager must take all the aspects of the transaction into account. It is important to trace the religious artefacts to its origin to make an efficient decision of purchasing or selling the item. The collecting institutions have a social responsibility to have a potent provenance policy and purchasing standards. Museums and Galleries are responsible for securing the cultural heritage and guarding the past forever, therefore is important that they act following the highest ethical standards.

References for Supply Contracts Due Diligence

ABC News. (2014). Expert labels National Gallery 'naive' as it sues over allegedly stolen Indian Shiva statue. Retrieved from https://www.abc.net.au/news/2014-02-13/national-gallery-sues-us-art-dealer-over-stolen-indian-shiva-st/5256568

Art-Law Centre University of Geneva. (2015). Dancing Shiva Statue – India and National Gallery of Australia. Retrieved from https://plone.unige.ch/art-adr/cases-affaires/dancing-shiva-statue-2013-india-and-national-gallery-of-australia

Barker, A. (2016). Dancing Shiva: National Gallery of Australia should get $11m compensation for stolen statue, court rules. Retrieved from https://www.abc.net.au/news/2016-09-26/nga-granted-11m-compensation-for-stolen-dancing-shiva/7878740

Davies C., James P., Oliveri V., Porter G., & Wise J. (2020). Art crime: discussion on the Dancing Shiva acquisition. Journal of Criminological Research, Policy and Practice. Retrieved from https://www.emerald.com/insight/content/doi/10.1108/JCRPP-03-2020-0033/full/html

Drum, P., McDermott, Q., Richards, D., & Worthington, A. (2014). Dancing Shiva: Brandis slams National Gallery of Australia over $5m purchase of Indian artefact. Retrieved from https://www.abc.net.au/news/2014-03-24/brandis-slams-nga-over-shiva-purchase/5342116?nw=0

Goebel, P., Forstl K., & Reuter, C. (2012). The impact of stakeholder orientation on sustainability and cost prevalence in supplier selection decisions. Journal of Purchasing and Supply Management 18, (4) 270-281 Retrieved from https://www.sciencedirect.com/science/article/abs/pii/S1478409212000350

Folan, L. (2019). Wisdom of the Goddess: Uncovering the Provenance of a Twelfth-Century Indian Sculpture at the National Gallery of Australia. A Journal for Museums and Archives Professionals. Retrieved from https://journals.sagepub.com/doi/10.1177/1550190619832383

DOI: https://doi.org/10.1177/1550190619832383

Jin, Y. C. (2018). Public gallery or antique shop window: dance with the NGA's Dancing Shiva. International Journal of the Inclusive Museum 11(3), 23-35. Retrieved from https://web.a.ebscohost.com/abstract?direct=true&profile=ehost&scope=site&authtype=crawler&jrnl=18352014&AN=131412565&h=EJ5GWss%2bXWOOToExiZUjjMcPbHtgm99wPTl6A5w%2fyKiD%2beayyE3Ih9mSmZYQ5CHBpDlY0nMCKn1aIaGCE61odw%3d%3d&crl=c&resultNs=AdminWebAuth&resultLocal=ErrCrlNotAuth&crlhashurl=login.aspx%3fdirect%3dtrue%26profile%3dehost%26scope%3dsite%26authtype%3dcrawler%26jrnl%3d18352014%26AN%3d131412565

Neal, J. T. (2014). Provenience, provenance and the UNESCO 1970 convention: two schools of thought on publication of indeterminant artefacts. Cultural Heritage, 3. Retrieved from http://meta-journal.net/article/view/2720

DOI: https://doi.org/10.17192/meta.2014.3.2720

Nicholson, A. M. (2014). National Gallery of Australia defends practices despite admitting it may have been conned into buying stolen Indian art. ABC News. Retrieved from https://www.abc.net.au/news/2014-03-05/national-gallery-defends-practices-over-suspected-stolen-art/5300966

Parikh, R. (2014). The last dance? Scandal surrounds the NGA’s allegedly stolen Shiva statue. Retrieved from https://www.apollo-magazine.com/last-dance-scandal-surrounds-nga-allegedly-stolen-shiva-statue/

Subramanian, N. (2016). Waiting for the Natraja. The Hindu. Retrieved from https://www.thehindu.com/news/national/waiting-for-the-nataraja/article5920514.ece

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