Friday, 30 September 2016

Book Review - The Nanologues & Reva Electric Car - India's Green Gift to the World - Feb 2013


Book Review: Two Gritty Little Drives
Two cute little Indian cars, a crazy drive and an amazing journey

The Nanologues: 10,000 km across India in the world’s cheapest car, Vanessa Able, Hachette India, pp 323, Rs. 399
Reva EV: India’s Green Gift to the World, Dr S.K.Maini, Random House India, pp 192, Rs. 299
Imagine a person driving around the Indian peninsula – from Mumbai to Mumbai, via Kanyakumari, Kolkata and Nainital. The trip takes 90 days.

Now imagine that the person is a woman. Alone.  In a Tata Nano.

Is it possible? Answer is, yes. The woman in question is Vanessa Able, an English journalist. Her gritty tale is documented in her monologue, titled The Nanologues.

So, such a thing is not only possible, but you -- and your Nano - can emerge practically unscathed from such an experience. Ergo, it is not just doable, it is within anyone’s reach.

Well, only almost. You have to have the gumption to undertake such an expedition. Everything that you expect will happen does happen, but thanks presumably to Ganesha on the dashboard, ways and means spring out of complete adversity, nothing extreme does happen and the author thrives to tell the tale, having mainly suffered only extreme pangs of indignation.  Her tale does include roads suddenly ending on the edge of a cliff, and wheels screeching to a halt in front of unexpected police barriers and trucks making a U-turn in the middle of the road, apart from cornea-searing headlamps and bottom-scraping potholes. The story has two morals – one being that the Nano is a gritty little car, whose misdemeanours through the 11,000 km ride total to one misaligned steering wheel. The second moral is that an Englishwoman will have to do a little bit of un-learning and re-learning in order to drive around on South Asian highways, a point that Able graciously concedes.

Able’s writing is fluent and laced with, well, Brit-style humour. She dispenses with political correctness and is blunt about horns, headlights, hierarchies, stares, cops and toilets. There are also moments of awakening, such as:  “The most important preconception to tackle was that horns always imply hostility”. She learns and acknowledges the complex language of highway honking  – something most car-driving Indians cannot claim to have done! Her story is smartly interjected with information about places, people, things.

Who should read the book? Able’s target audience is mainly foreigners, especially who want to drive in India. I would add to that, people who have some lazy afternoons to spend, Tata Motors people and their competitors, PR people and those concerned with transport or tourism or travel blogs. I promise entertainment, except for those now-and-then moments when Vanessa Able may get under your skin with her way of shrugging away the ‘Indian way’. 

If the Nanologues are written with half an eye on celebrity, then Reva EV: India’s Green Gift to the World is written with both eyes bent on gaining acknowledgement. Reva EV is a chronicle, in which the senior Maini recounts the long and difficult journey that led a precocious youngster toying with model airplanes to launch an Indian electric car on the world stage -- among the first such cars.

The Reva was not an accident. Unlike the Nano it was not an after-thought, nor was it a child of impulse. The genesis of the Reva was slow but sure, a seed germinating on the shopfloor of Reva Precision Products, and taking initially the form of a custom-built electric forklift, in 1984. Combined with the early germination of genius talent in the youngest Maini – Chetan – the idea of building an electric vehicle in and for India started taking shape in the mind of the Maini patriarch. The story of the Reva is as much a story about the Maini family,  of a dream nurtured and brought to life by Sudarshan Maini, in which each of his family members would have an acknowledged if unequal role.
It is easy to recount a journey after it has happened, especially if you live to tell the tale.  However, the journey before it has been made is a plunge into risky darkness, and that is true of both the journeys - the stories of which we are here reviewing.  The journey of the Reva electric car was undertaken with a sense of destiny. The project was financed and supported by the Maini Group, allowing Chetan Maini to focus upon and pursue the dream of a compact zero-emission city car - made in India. This tale is without a doubt a memorable one in the history of Indian enterprise.

Told in a quietly assertive tone, for which the credit must also go to the co-author Sandhya Mendonca, Reva EV is, title onwards, a simple and uncomplicated 3-hour read. The story is sprinkled with best practices in Indian innovation and sustainability. Modular design, frugal innovation, partnership, persuation, technology, design, PR, public sentiment, values – are all covered in the narrative. This little book is case study material for B-schools, but should also be read in every Indian high school.
Shailaja D Sharma

Book Review - Why Some Firms Thrive - Crisis Lessons, T H Stanton, 2013

Why Some Firms Thrive While Others Fail: Governance and Management Lessons from the Crisis
Thomas H Stanton
Oxford University Press, New York, pp 278, Hardback, Rs.1645

In 1986, a relatively unknown economist wrote about the boom-and-bust financial cycles, contrasting them with the attendant cycles of risk. In the boom period, risks appear remote and companies are willing to increase leverage. Lending standards fall and risk management is marginalised, until boom gives way to bust. Governance and risk management are most necessary in the growth phase, rather than in the bust phase when caution would naturally dominate, however the discourse on these topics takes place at the other ends of the cycle. The dreaded ‘Minsky moment’, is the tipping point, when increased risk-taking on the part of lenders meets with a price slump, destroying asset value and engendering a sharp downward financial fall.

This was all studied and recorded decades ago, yet the crisis that began in 2007-08 could not be prevented. Will it happen again? Thomas Stanton argues that the very act of rescue by government -- of ‘privatizing profit while socialising risk’ -- undermines the debt-holders’ interest in and ability to monitor risk, a vital source of market discipline, thereby sowing the seeds for the next recurrence.
Collecting evidence from the debris of the financial crisis via interviews conducted in his capacity as staff on the Financial Crisis Inquiry Commission and his own research work at John Hopkins University, Thomas Stanton brings together the complex story of the financial crisis, spanning as diverse issues as mortgage and financial product pricing, approaches to governance of large & complex financial institutions to behavioural economics, organisational structure & public policy.
While risk taking is natural in business, it has to be balanced with sound practices in risk management and governance. The likelihood of ‘black swan’ events is accentuated in the case where companies become globalised or otherwise experience rapid growth. Stanton makes a detailed comparison of companies that survived the crisis (with or without government support) versus those that went under (often despite government efforts).

Stanton identifies many specific organisational, behavioural issues that increased the risk to companies or reduced the effectiveness of regulatory bodies or both. “Normalisation of deviance” is a phenomenon of “reducing standards to unacceptable levels based on past success, without taking account of the risks involved in the new low standards”, a concept originally developed in the context of the Challenger space shuttle disaster. “In the pursuit of unprecedented profits, financial firms, mortgage originators, securitizers, rating agencies and investors deviated sharply from traditional standards of prudence. Increasing asset prices masked risks inherent in those lower standards”, he says. He emphasises the importance of distinguishing risk, which is quantifiable, from uncertainty, which requires judgement. “Successful firms used judgment to add more protection than quantitative modelling would have suggested by itself”.

Stanton outlines the history of the financial crisis, the build-up of vulnerabilities, starting with the glut in global savings and the development of low-cost credit and an active market for instruments that offered safety-plus-yield. As financial firms innovated with new products, companies often lost sight of what was really backing a particular AAA-rated security. Individual transactions appeared to be ‘reasonable risks’ but in aggregate assumed very different risk profiles. “If one part of the daisy chain broke, the market was in danger of collapsing.”

And it happened: Mortgage defaults took place, funds failed, companies exposed to ‘toxic assets’ collapsed, the market panicked, jobs disappeared, incomes fell, feeding the downward spiral.
However, the book is mainly about the learnings.  The book offers well- illustrated examples of behaviours that worked and maxims that withstood the test. JP Morgan Chase was helped by a ‘fortress balance sheet’; and a ‘one client, one firm, one view’ global approach. Goldman Sachs had a hands-on risk management approach with daily monitoring of the firm’s enterprise-wide risk profile on a mark-to-market basis and a focus on liquidity. For Wells Fargo, decisions to avoid risky instruments were hard choices but ultimately protected its customers. Toronto Dominion Bank CEO Edmund Clark, who holds a Ph.D. in economics opined, “I don’t think you should do something you don’t understand, hoping there’s somebody at the bottom of the organisation who does”. Generalising, the book cites a study which showed that banks with the highest returns in 2006 had the worst returns during the crisis.

Valuable insights are presented on Board constitution, competencies, tension between the revenue and compliance, lack of long-term data (in the statistical models), lack of experienced staff, etc. The author describes the phenomenon of ‘cognitive capture’ of supervisors by the business perspective. Another important observation is about regulators’ deference to the overriding belief in the self-correcting abilities of the market.

Each chapter is introduced with a powerful but pithy comment, usually sourced from the congressional hearings. By Chapter 7, one notices repetitiveness, but that reinforces points made earlier. The book lends itself even to the novice, but students, teachers and practitioners of risk, corporate governance and public policy would greatly benefit by studying it.

Interview: Naveen Soni, CSR Head, Toyota, Aug 2016

“R is for Responsibility”

In this interview, Naveen Soni, VP of External Affairs, CSR & PR, Toyota Kirloskar Motors Private Limited, speaks about why the CSR programme in India goes beyond business into social domains unconnected with Toyota’s core business. We also explore the values underlying the company’s approach, its work ethic, its way of working with stakeholders and the governance structure it operates for CSR.

Q. Toyota (TKM) seems to have a range of programmes under its CSR portfolio, including education, sanitation, etc. How do you justify your CSR portfolio to your business heads?
A. In Toyota, CSR is a responsibility, a voluntary activity, not driven by laws. TKM set up a manufacturing plant in India back on 1997-98, and the CSR programme began right at that time. It was not an after-thought, nor did it begin after the government policy was enacted. 
We may say in some sense that manufacturing is fundamentally anti-thetical to ‘nature’ -- because it involves removal of natural objects and creation of man-made objects. Toyota, being a manufacturing company, addresses this fundamental issue in its core value of Monozukuri, which refers to sustainable growth, in harmony with nature. All our activities are to be conducted with balance and harmony. This is a fundamental premise.

Therefore we seek growth with environmental sustainability and social harmony. CSR is a platform to share the wealth created. Our projects are not linked to the business cycle.
Q. Can you help us understand how the global sustainability focus of Toyota translates into your local sustainability and CSR programme?
A. CSR at TKM is two-pronged. We have a global sustainability focus, which we embed in our local CSR. Specifically, our global focus on Traffic Safety as a theme that is close and dear to our business is also rolled out locally. In addition, we undertake developmental work benefiting the local community, some of which may be aligned with the local government mandate. However, we seek to make all our programmes sustainable.
In order to manage a well-defined programme, especially one that is run with third parties, it is essential to have clear thematic focus areas.  Our focus areas are: 1. Traffic Safety; 2. Education; 3. Environment; 4. Health and Hygiene. These are thematic filters, whereby we can select activities out of the many that are proposed by stakeholders. Such a focus is also mandated to us by our internal “Kyoto Protocol”, which gives the guidance that scope of our social contributions shall be confined rather than spread out.
Q. It appears then that you have two types of CSR programmes – one linked to your business domain and one that is un-related.
A. The Traffic Safety programme is indeed linked to our business domain, but it is not driven by our business needs. Under this programme, we reach out to school-children and educate them on road safety.
Our manufacturing plant is located at Bidadi, 30 km from Bangalore. Our road safety activities are focused mainly in the city of Bangalore. In the vicinity of the Bidadi plant, we undertake all the community development programmes. We work with 4 gram panchayats, across 20-25 villages, where we work on education, health & hygiene and environment.
The Bidadi Industry Association, of which we are an active member, is also involved in the rollout of our programmes.
Q. How do you leverage the industry association for CSR? Does the association have the requisite skills to support a CSR programme?
A. The role of the industry association in regard to CSR is to make the local interventions more effective. For example, we work with BIA to identify the villages in which to focus. BIA makes sure that the industries in the region distribute their efforts and cover all the villages equitably.
We operate through local NGOs as well, and the industry association can help identify such organizations and monitor them. TKM execs and others build capacity in BIA for these purposes. The PDCA (Plan-Do-Check-Act) model of continuous improvement in business is also applied to the CSR process.
Q. Do you also reach target customer segments with the Traffic Safety programme? How does the programme work and do you measure results?
A. The Traffic Safety Education Programme (TSEP) is a 3-layer model which includes, Coaching, Evaluation and Action-Learning, and it entirely targets middle-school learners. Of course, we indirectly impact their parents and other adult stakeholders, but it is not the focus.
We try to instil the idea of rules, need for rules, etc. through the programme. The practice component has been recently added. We work with Traffic Wardens and local authorities to roll out the practice component of the programme. The programme covers several metros.
In terms of impacts, even such a simple programme comes with challenges. Children receive contradictory signals from parents, society and the general environment, which the trainers have to deal with. We can easily measure the input- and output-side measures, in terms of training delivered. But in order to create safe roads, we are going beyond these measures, into societal impacts achieved. This is why we are now working with more stakeholders in the current phase of the programme.
Q. Is there a difference between the Asian and Western companies in terms of their approach towards CSR? Most Western companies would look for a direct connect between the business and the CSR programme, but you have no such requirement.
A. Our approach is to do good for the sake of doing good. Public perception in India demands the absence of a link between the business and CSR. If you make a link to the business objective, where does the emotional connect come from? For example, the programme of some FMCG companies, of giving share of the price of each product purchased, does not give the same feel!
Q. How do you allocate funds, in that case? Where do the business controls come from?
A. We make a list of the proposals coming from the target communities, i.e. from the gram panchayats. Some of these are ongoing activities which need to be carried forward or terminated. Some are new proposals, which need to be tested for a fit with our thematic filers and our ideas about sustainability. Where such a new activity is adopted, we provide adequate justification from the standpoint of working with the communities and fulfilling our responsibility.
Checking with the 2% profit share compliance is something we do afterwards. Even in our loss-making years, we have continued our CSR programme.
R is for Responsibility. It cannot be mandated.
Q. That is very well put, indeed. Is this something that comes from the Japanese values that Toyota is known to exemplify?
A. Toyota is an ethos-based company. I would say that it is not so much a company, as much as a culture, a way of being.
There are 10 values that are at the foundation of the Toyota culture and these are not compromised. Anywhere in the world, there is a uniformly distinct Toyota.
Some of the well-known ones are the spirit of Kaizen – which is about how individuals can pursue evolution via innovation; the Toyota Way; and PDCA.
Many companies have adopted the Toyota Production System (TPS) model, but there is really no meaning in adopting the model without the underlying values, which are a commitment to continuous improvement and respect for people.
Q. What about governance, the topic of greatest interest to the readers of The Directorial? How is corporate governance exercised in the domain of CSR?
A. We have a CSR Committee of Directors, which takes decisions. This is a de-risking and strengthening strategy. The Committee members have no direct executive role with regard to CSR. Proposals go up to the committee and are evaluated and thereafter modified and approved or rejected.
Independent Directors or external opinions may be sometimes sought, but the process of decision-making is driven internally by the Toyota value system. It is challenging to bring in meaningful external inputs, because outsiders may not know or be able to internalise the Toyota way of doing things and reflect them in their suggestions.
The India operations are a part of the top 10 global affiliates of Toyota. Knowledge-sharing with regional headquarters in Singapore, at the best-practices sessions, happens on a regular basis to ensure we are continuously learning and growing.

In the Health & Hygiene vertical, the water purifier and sanitation programme for girl-child, the sustainability model which ensures that infrastructure is maintained and schools adopt the systems – is a best practice from India. Incidentally, TKM has received awards from CII and IOD for CSR, Sustainability and Supply Chain.
Q. What sort of a CSR team do you have at TKM and what sort of skills does the team need to have, in order to work with these grass-roots level programmes and diverse stakeholders?
A. Our current team size is 6, but we aim to leverage the TKM team of 6000 for this cause!
All our staff wish to engage with the CSR programme and we are making plans to fulfil this aspiration.
The key skills in my view are: 1. A sense of ownership for the programme; and 2. A sense of giving to society. CSR is not a check-box activity. A degree in social work is helpful, although not mandatory. We have separate teams for CSR, PR and media, but there are overlapping stakeholders and areas, therefore our team has to be able to communicate well across stakeholders.
Q. How would you sum up the work culture at Toyota?
A. “Taking everybody together” is the key to decision-making in Toyota. All the decisions are made by consensus. One of the key requirements for successfully working in TKM is the ability to do team-work. It is team work rather than individual brilliance, and building consensus rather than having flashes of genius that is appreciated here. Thus, more efforts have to be put into planning and this may take time.
5500 parts go into each car we make. We are therefore not afraid to own up, and deal with with any customer complaint and we have done that. Yes, there is a hierarchy, a respect for seniority – all this protects against failure.
----------------------------------------------------------

Interview with Dr Kalpana Gopalan, IAS, Principal Secretary - Training, Govt of Karnataka, Jun 2016

“Change Will Come in Small Packets”

Dr. Kalpana Gopalan is a woman leader who is very much at home in the saddle, driving and leading change processes.. In this wide-ranging interview, she asserts that leadership in public service has little to do with gender. However, she goes on to identify what makes women leaders successful and what can be done to bridge the much-discussed gender gap in corporate leadership. The gender quota for Boards will help push change, she says.



Tell us something about yourself -- how long you have been in public service, in what roles, what drives you?
I have been in the IAS for28 years, in varied and cross-sectoral roles, in  Education, Rural Development, Land Management, Urban Development, Civil Supplies. I have not only worked in diverse sectors but also in different types of roles. I have been a development agent as CEO of a Zilla Panchayat and Director, Special Economic Programmes, I have played a regulatory role as a District Collector, a judicial role as Chairman of the Karnataka Appellate Tribunal, and now I play the role of a trainer. Some of my seminal experiences are setting up the new district of Udupi, way back in the L990s, and spearheading the literacy program all the way to winning the National Literacy Mission UNESCO Award 2000.
What drives me is the acceptance with which I am embraced by the people of India. I interact with people from different milieus, who speak different languages, but everywhere I have been more than accepted, I have received affection and encouragement.
What kinds of roles are women taking up in public service; and in which roles are they making a difference?
A woman in the working world is not a new phenomenon. What has  changed over the years is that the number of such women has grown; and you find more and more women at every level. To me this signifies that the working world is no longer an elitist preserve, or limited to what we call the "progressive" sections of society; instead this phenomenon has become truly democratised. Women's roles in public service are unrestricted, and there is no domain that is out of bounds for women.
In urban areas, the democratization of the workplace is driven by the lT sector, which has opened many technocratic positions to women. In the rural sector, it has taken place through the institutionalization of Panchayati Raj.
Generically, women bring the same or similar talents to the job, namely, domain knowledge and the ability to persuade, or team leadership. Public sector life is however, more chaotic, with a variety of unstructured situations and seemingly intractable problems. With patience and persuasion, though, everything is solvable. 'Change Management' is a buzzword in the MNC sector, but in the government sector, sudden changes are normal. In  government, our bags are always packed for sectoral or spatial moves. . The public sector can learn from the private sector how to focus on efficiency, performance measurement and adopt a structured approach to problem-solving
How do you think India is doing in terms of women's leadership? Do you see a good number of women in your peer group, working with freedom, authority and self-confidence? 

Authority, for me translates as accountability and responsibility. In the lAS, women have been leading from the front, whether it is bringing sanitation to the village or quelling a communal riot. The responsibility that an officer handles does not change with gender. Also, the duties, powers and accountability don't really change whether you are in the infrastructure sector or the housing sector. In certain positions you are more in the public eye, in others there is relative anonymity, that’s all.
Coming specifically to the contradictions in the life situations of women, let us first see the term Women in its plurality. Women are not a homogeneous group. In terms of ethnicity, socio-economic status, etc., we have multiplicity. Paradoxically, one  strain in our collective thinking is the 'good girl' vs. 'bad girl' stereotype. This begins at school, and the  mental images persist. Even today, a girl alone at night is subtly labelled. This amounts to a collective hypocrisy which we need to shed urgently.
Is women empowerment different from women leadership? Are Indian women empowered?
The term 'empower' should disappear from our vocabulary. Empowerment is not an 'injection' that can be administered! lt should be replaced with what is normal in a just and equitable society.
Can you suggest three key focus areas for public--private partnership, which will drive women's leadership, and at the same time make business sense?
Public-private partnerships should account for the immediate needs of the target group - in this case, women and the corporates. I would suggest the following: First, kick-start a Career Restart for women who take a break, by lowering or eliminating entry barriers to women who return to work after a hiatus. The government sector allows a break without loss of seniority, for example. Bridge courses or refreshers may be one way to help.
Secondly, for women entrepreneurs, their initial investment usually comes from family finance; but continuing access to finance for expansion,  or simply to keep operations going is a problem. Easy access to institutional finance from public sector banks can help women entrepreneurs flourish.
Thirdly, skill development with specific focus to facilitate women in the corporate sector, for example, via training that takes into account the requirement of prospective employers and is tied to placement in the corporate sector. The National Skill Development Corporation, (NSDC) is a one of its kind PPP in lndia, under the Ministry of Skill Development. lt aims to promote skill development by catalyzing the creation of large, high-quality, for-profit vocational institutions.
Many companies have not filled the mandatory requirement for women directors. How can we bridge this gap?
I would like to know how many of the woman directors trained by IOD and others have actually found their way into boardrooms. If we look at women directors only as a mandated requirement, there may even be a drop in demand because the diversity quota has been fulfilled and the company looks no further. You need quotas because it is dlfficult for board diversity to happen naturally; but this is only a short-term measure. A long-term and sustainable change requires a three-pronged approach: Companies need to focus on widening the talent pool of women in leadership roles and also  mentor women directors. Two: Currently, most board appointments happen through word of mouth. When positions get vacant, male directors are more likely to be appointed by a major shareholder. So, building up networks and getting known is something that women directors need to do. Three, IOD should go beyond training, into education and advocacy with corporations.
En-masse change may not happen; in India, incremental small changes, one at a time - is the way change happens. Invisible 'pocket revolutionaries' at the micro-level - such as small entrepreneurs with energy, domain expertise and engagement - are the ones who will drive the change. A similar thing may be said of Boards.
What specific initiatives are you leading for helping women succeed as leaders and transformational catalysts?
I led the adult and non-formal literacy programme for Karnataka, under the State Literacy Mission and its success is something I take pride in. Another programme is the Self-Help Groups in the Hyderabad-Karnataka region, where literacy and micro-finance were combined. These SHGs tied up with Cooperative banks and had the largest savings in the country.  As CEO of a Zilla Panchayat, I was able to support many small innovations which made a big difference at the micro level. I am associated on a voluntary basis with Bangalore Women Federation which focuses on economic betterment, career-restarts and start-ups. I am also an empanelled speaker on HER initiative - which targets the young via role model speakers and promotes the acceptance of women leaders. I frequently speak, or rather “speak out" on women's issues, most recently at llM Ahmedabad, llM Bangalore, M.P.Birla Institute of Management and Xerox Business Services among others.

Interview with Prasad Chandran, ex-CMD, BASF (India) Ltd

“We Need Good CEOs”



Mr. Prasad Chandran, who retired as Chairman & MD of BASF (India) in 2013, was recently decorated with the highest civilian honour – the Bundesverdienstkreuz -- of Germany, in recognition of his contribution to Indo-German trade relations and commitment toward ethics in business and public life. Mr Chandran is a member of the Board of Bosch, HDFC Life and Coromandel International. He spoke to The Directorial about the importance of ethics and corporate governance and the qualities required in business leaders, to be able to steer Indian industry today.


Q: Mr Chandran, why is corporate governance and ethics a particular passion of yours? What led you to decide that this would be the central theme of your public life?
Corruption is a widespread problem which weakens the social and business environment. It is not restricted to the public sphere as is widely believed, it also afflicts the private sector.
As CMD of the largest listed chemical company in India during 2000-2013, I had many opportunities to see these situations. Some of the most corrupt practices are in land deals, pollution control, environmental clearances, hazardous substances, sales tax, exim, logistics, etc. Putting your foot down is a tough, long and lonely path.
I convinced the Board of BASF that ethics would be one of my focus areas for the operations in India. It is not an easy position to take. But then, the ability to take risk and responsibility with commensurate authority is what make a leader.  
After I had served an additional term as CMD, I decided that I would focus exclusively on areas of ethics and governance, via SEEGOS[i]. SEEGOS tries to bring in transparency, ethics and governance to check corruption.  We work with CEOs, professionals and even school children. For school children, the programme was inspired by the legendary Dr APJ Abdul Kalam, where the children take a pledge to plant 10 saplings each and to “be honest and endeavour to make society corruption-free”.
Q. Are the issues in ethics the same in both public and private sectors?
Corruption comes in two forms: Collaborative and Coercive. In collaborative corruption, both the giver and taker are advantaged by it, and sometimes nobody else is directly harmed. In the long term, the nation is harmed, but nobody may be adversely affected in the short-term. Corruption in this case is a competitive tool – in the sense that it is used to keep competition out. Both parties involved have the choice to not practise it, but they do.
Collaborative corruption can be ‘private-to-private’. It can be anti-competitive. People can make unaccounted money. In coercive corruption, the poor suffer. It is what occurs for example at the ration office, at the lower rungs, where there is an imbalance of power. An example is the collection of speed money, in NREGA, PDS, etc. Here, citizens are denied what is their due. The giver and taker are not in the same power position.
Of course, we have the CBI, the Lokayukta, etc. but they offer long-term institutional measures. Recently, the Maharashtra government has passed a Right to Services Act, which is also a favourable institutional provision. For fast and immediate action, I believe that the solution to the coercive corruption is in the hands of the tech-savvy 300 million net users, who can make use of the social media, use the Right to Information Act, etc. The middle class must get involved and not just be cynical. SEEGOS offers this platform.
Q. What about private sector corruption – what measures can be taken to curb unethical and anti-competitive practices?
The Company Law is a powerful instrument of change. Through the management committees of various Chambers of Commerce where I have been a member, I have tried to bring amendments to the law, leading to better transparency. We have to identify where and how CEOs participate in collaborative and coercive corruption, so as to be able to deal with those situations.
The provisions of the law are welcome. From 1 April, 2014, the law provides for Independent Directors, and Auditors have to be changed regularly. Audit Committee should be chaired by an Independent Director. For example, as CMD of BASF (India) Ltd, which grew from a Rs.750 cr to a Rs.9000 cr company during my tenure (2000-2013), I never participated in the Audit Committee. It was left to the Independent Director to chair the meeting. Therefore these are measures that can be implemented.
Even today, I am choosy about the companies I am a Board-level Director of. I have chosen only 3 companies and 3 NGOs in this regard. In some I function as the Chairman or member of various Board Committees. I would not be a part of a Board that does not ensure the requisite level of transparency.
In addition to the law, there are international provisions and forums that are helping ethical business leaders function and succeed. For example, there is the UN Global Compact, the UN Cooperation Against Corruption, etc. The Government of India is finalizing the POCA (Prevention of Corruption Act) which will be tabled in Parliament any time soon. The new law has provisions to penalize the giver in the act of corruption.
CEO’s will not comply out of the goodness of their heart. We have to take the choice out of collaborative corruption, by enforcing the law strictly.
Q: What are the implications for company leaders in this regime of greater scrutiny and controls?
If bribes are being paid, it is not difficult to track where they are coming from. Cash is generated in an organization from scrap deals, purchasing contracts, land deals, etc. There is a saying: “Fish stinks from the top.” The #1 guy must be absolutely clean. If the leader is clean, the rest have no option but to follow.
Q. What about the interplay between the aspirations of shareholders and the compulsions of CEOs? How can the Board manage these dynamics?
The Board is the trustee for Capital. The Board can enrich the stakeholders, but it has to be done ethically. At today’s income tax levels of 35-40% every high-income earner can have no objection to paying tax and enjoying the rest of the earning.
The CEO should never be completely subservient to Capital. That is where the Board has a role to play, in ensuring the balance between aspirations, compliance and ethics.
Q. Is ethics a function of opportunity, as it is sometimes framed in discussions on corporate fraud? That is to say, do you agree that the key thing is to remove opportunity from the path of the potential wrong-doers?
I disagree. There is a difference between ethics and compliance. Compliance is about abiding by the law. Ethics, by contrast, is what you grow up with. Ethics is internal and does not have to do with any other attribute or classification.
In my experience, most Indians do not have a cultural pre-disposition towards being corrupt. For example, when their children go to write exams, mothers pray for them and try to help them with food, rest and so on, but do not urge them to cheat! Later on in life they may become cynical, when they learn that the corrupt succeed, but that is not the value they grow up with.
Q. You seem to be saying that the commitment to ethics is tested within the fire of opportunity. These days, the path to the CEO’s desk is greatly shortened and not every CEO has had a long career behind him or her, or a lot of experience. How would you choose a CEO?
The choice of tomorrow’s leader will not be about technical skill – because skills are available, skill sets of individuals are already checked out. At the CEO level, functional heads such as CFO, IT head, Legal, HR, Business vertical heads – are all in the race, and in addition there are candidates from the outside. This constitutes the set  from which choice must be made.
It is not knowledge of all the functions, but leadership that is important. Nobody is a wizard or a genius. The leader must be professional, with strong communications and strategic thinking skills, inter-cultural orientation and change-management mindset – but all this has to be viewed in the backdrop of his or her ethical grounding. I would reject the best candidate if the ethical background was found to be wanting.
Young people come in more often these days into these roles, often highly qualified. By the time they are in their mid-thirties or forty, they get top positions, often well-negotiated. If they are able to combine their personal goals with the company goals and national goals, they can achieve great results.
The skill set is easy to check – by the educational qualifications. The competencies are easy to validate – from roles and positions held, international postings, etc. It is the ethical background of the person that is harder to assess, and which may get missed in the process.
Q. Is the profusion of laws an aid or an encumbrance in doing business?
The problem is that the older laws are not scrapped. The older laws continue to exist – which makes it difficult to do business. The implementation is with the local authorities, where there is the high level of discretion and also the highest level of corruption. Contemporary laws are essential and make a level playing field, which will make the ease of doing business, with an understanding of short-term and long-term implications. For example, if Snapdeal and Flipkart tried to do business with the old laws, it would be problematic. New business models require new laws to be enacted.
Q. Do Indian-owned companies and foreign multinationals view ethics and compliance in the same manner?
Essentially, yes. For a foreign CEO, the laws in their home country (often) give him or her no choice, that is the difference.
Q. Are you also suggesting that there are fewer ‘good CEO’s’ than are required right now in India?
India is at the cusp of opportunity. But we need good CEOs.
Today’s CEO, whether of a listed or unlisted firm, and irrespective of industry sector, size and growth – has to understand the competencies and skills his or her team needs to have. The CEO must lead the available team to achieve the objectives.
Enunciating Vision and Mission statements is easy but implementing them is the challenge. The test comes when you reach a crisis, and how you react to it.  
Q. Often these ‘tests’ as you call them come in the form of dilemmas, don’t they?
Yes. Ethical compliance used to be hard to achieve in India, in the manufacturing business. At BASF, whenever we acquired companies, it used to be mandatory for the new staff to wear the BASF badges. I made a ceremony out of the Chairman handing out the new badges. I would call in the CEO, CFO, etc. and ask them to say by when they could completely change their way of working, to become a part of the transparent and ethical culture at BASF (India). The badge would be given only when acquired company reached the ethical standards, however long it took.
The laws are themselves often internally conflicting – “booked if you do, booked if you don’t”! As a company, often you cannot fight the law-enforcers, who in some instances have no accountability and close down your unit. This is where Business Associations, Trade Channels, etc. come in and can play an important role in articulating the issues and getting them resolved at the appropriate level. Things have vastly improved over the last 7-8 years and today every CEO can commit himself or herself to their own defined principles and standards of excellence.
Q. Therefore do you feel optimistic about how things are moving now in India?
I am always optimistic about India. We have the best natural resources, the best agro-climatic conditions and some of the most intelligent people in the world. India has limited scope for large-scale commodity manufacturing, with conventional technology – China has already become the manufacturing capital of the world. Similarly, very high-tech, capital-intensive manufacturing, with humans being replaced by robots, is also not relevant. India needs an innovative model in manufacturing, and services which can absorb a million job-seekers every month.
In the developed world, cost of capital is almost zero. Lots of capital is changing fewer and fewer opportunities. Hence, India has excellent scope to tap global markets in its own innovative way. As an example is the Masala rupee-denominated bond.
The strength of India is in its entrepreneurial abilities. Therefore if the MSME are given a transparent, corruption-free framework to do business, they will identify and collaborate for appropriate innovative business opportunities.
Therefore, for India, we need the PSU’s, the large Indian companies, the MNCs and the MSME to work in a symbiotic, mutually beneficial, collaborative, unique model. That is what we need in the country.


[i] Social Enterprise for Ethics, Governance and Organisation Strategies