tag:blogger.com,1999:blog-19649274.post7179698826624660956..comments2024-03-27T17:16:12.789+05:30Comments on The Leap Blog: Indian capitalism is not doomedAjay Shahhttp://www.blogger.com/profile/03835842741008200034noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-19649274.post-68742878799528590812012-09-15T20:42:06.920+05:302012-09-15T20:42:06.920+05:30Optimistic post, but tough to agree.
On crony cap...Optimistic post, but tough to agree. <br />On crony capitalism the 2G and the Coal scandals highlight the fact that it is well and perverse. The 'good practices' of the old rich are available for full display - tata and reliance have had big advantages. The fact is that Bombay club closed ranks and controlled the process/govt and therefore are the beneficiaries. Reforms should have thrown up many more standalone cos. <br /><br />No, the supply of research on the companies is pathetic. Veritas is the only one and the firm and it's employees are not domiciled in india. Please do analyze the research reports of Ambit!!<br /><br />About employees, all the data points are anecdotal and hearsay. 'Smart' people are happy to work for all the corporate houses named in various scams.<br /><br />Indian capitalism is crony and has got worse in the last 8 yearsAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-65738762136056389882012-09-13T10:58:18.990+05:302012-09-13T10:58:18.990+05:30Part 2/2
“The sight of senior employees going into...Part 2/2<br />“The sight of senior employees going into Tihar Jail has given out powerful messages to everyone in Indian companies that good people should not hang out with crooks”<br />Unfortunately, this is still not true. Most people – young or old – still bill in the paradigm - I don't want to know how you do business; I will hold my nose since you stink; but as long as you offer me the highest wage, I will join you.The only change would in their attitude of unwillingness to do something which could land them in Tihar<br />“These factors are particularly important for the best and the brightest. If you are the best and the brightest, why would you suffer even epsilon risk of going to jail? Why would you run with crooks if this could hamper your rise to CEO? Why would you suffer reputational damage, and not be able to hold your head high at your class reunion?”<br />The above statements are exaggerated. While it may be true that some of the companies have crooks. But not all employees in these companies are crooks. Infact, the companies you are alluding to have, unfortunately, the best brains in the industry. Working with them can fast track the career prospects of bright individuals. It again boils down to the risk-reward proposition – similar to the stock price situation. <br />I know of several situations where a person was made an offer, and chatted about this with his friends, and turned it down. It was just too much of a risk to be seen in the wrong company.<br />For every such person, there could be many persons who still join these companies.<br />Second rate people recruit third rate people. Once a firm is contaminated with a series of low grade staff at senior levels, it becomes increasingly hard to draw in top quality talent, which drags down capabilities all across the board.<br />You seem to equate low moral value with low grade (professional quality?). I think that most of these crony capitalists would have, professionally, extremely high quality senior management executives. Infact, because of their money power, they are able to buy-out, top notch professionals.<br />To summarize, I’d say the following<br />1. There is too much corruption in the government – country has to choose between rotten entrepreneurs or no entrepreneurs.<br />2. It’ll be better to mend the politicians, bureaucrats, judges and media before targeting the capitalists – they at least contribute to the growth of the economy<br />3. Investors and employees still retain old habits – don’t care as they themselves are not affected<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-48328224099582441732012-09-13T10:57:07.533+05:302012-09-13T10:57:07.533+05:30Would like to comment on some of your statements: ...Would like to comment on some of your statements: Part 1/2<br />“Doing business in many areas in India involves an extensive interface with the government. In these areas, the weaknesses of the State generated an opportunity for crooks”<br />It is easy to blame the capitalists for being crooks but the fact is it is almost impossible to do business otherwise. So they have 2 options – either bribe their way around or don’t do any business. The business community would mostly prefer the latter – including the old ‘Bombay Boys’ . I’m not arguing whether that is the correct way but it is a way of life. Focus should be on handing out exemplary punishment to the Government officials and companies involved rather than blaming crony capitalism.<br />“They are staffed with hard-driving amoral people (typically incentivised very strongly using high-powered incentives), who fully understand the weaknesses of the system and attack it.”<br />I agree that a big reason for the above is greed but to a certain extent these people don’t have an option because, as I said above, certain industries and sectors there is no honest way of doing business and often people don’t have an easy option to get out of the sector due to professional and personal reasons. For example, a coal mining engineer ought to work in coal mining company even if it is scam-tainted rather than becoming a programmer in Infosys!<br />“Some crooked companies have faced enforcement actions by arms of the State.”<br />It is true but somehow these actions have been slow and ineffective. Most of the decisions take years to come and often to not cause great harm to the crooked companies – possibly due to control of these companies over their bosses Believe me, if the enforcement agencies (CBI, IT, ED, police, etc) are effective half of India’s problems would be solved. Unfortunately, there is rampant corruption within these entities which allow these crony companies to get away.<br />“Shekhar Gupta’s quote: To that extent, you have to admit that the market has been the first to sense the rot and has applied a stunning self-correction, severely punishing those responsible for it.”<br />To believe that investors care about honesty and governance is foolhardy. They still have the 90s mindset “I don't want to know how you do business; I will hold my nose since you stink; but as long as you will produce returns, I will happily invest in you.” It is just that these companies, through enforcement push or not, have failed to deliver expected profits – immediate and future. The investors will happily return if they see visibility on profits.<br />“Even if there is only a 10% chance of getting caught and thus getting -80% returns, that is a big risk from the viewpoint of the investor.”<br />You forget to mention the upside. If there is 90% chance of a reasonable upside, most people will buy. It is simply a risk-return calculation.<br />“Putting these together, the bad guys have a nice combination of carrot (throwing money at the media) and stick (litigation).”<br />While this is true the prevalence has surely declined in the last couple of years. It is difficult to find a business house which has not been criticised by the media. Post-Anna, hammering business houses and the government has become a favourite past time of the media and they seem to spare no one – even at the expense of carrots and sticks.<br /><br />“The problems of the conventional media and financial firms, which inhibit naming the crooks openly and in the public domain, has created a business opportunity in this space”<br />Very true. Definitely need research firms like Veritas.<br />“Foreign firms seem to be more prominent in this field of research and analysis from the viewpoint of ethical standards”<br />Not correct. Look at Facebook IPO for reference. Investment banks work solely to make money for themselves. Period.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-71969003671190453512012-09-09T17:15:49.502+05:302012-09-09T17:15:49.502+05:30While I agree with all that you have stated, I hav...While I agree with all that you have stated, I have a problem with Shekhar Gupta's claim, that the market has applied a stunning self-correction. That this implies some semblance of ethics imposed on these firms is at best a partial view. If ethics were to be a theme investors are concerned with, investments in these notorious firms would not have happened in the first place. If the coal blocks were allocated to firms and the markets thought this was unethically won, they would have dumped these stocks right then. <br /><br />A better argument to my mind is that the market perceived threat to these firms in this environment and saw that their investment is at stake. I'm not suggesting that there was no learning; yes, firms in the future will hopefully be concerned as markets did punish bad behaviour thoroughly. This punishment will be repeatedly witnessed only when the balancing forces in a democracy are seen to be working. <br /><br />I'd rather think that this is the channel than claim an invisible force that is far removed from the pulls and pressures of a democracy. Vimal Balasubramaniamhttps://www.blogger.com/profile/16378099011167625695noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-91845376818193456282012-09-08T18:12:05.507+05:302012-09-08T18:12:05.507+05:30CJI of Apex Court verdicts in Curative Petition fo...CJI of Apex Court verdicts in Curative Petition for Bhopal Gas Victims and Vodafone Tax Appeal to the tune of Rs. 11000 cr. tax evasion were rejected favouring foreign firms weded to capitalism against Constitutional mandate in 42nd Constitution Amendment in Preamble- "socialist and secular" republic of IndiaA. Patrawala Advocatehttps://www.blogger.com/profile/03431407027460521676noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-24935415868653236812012-09-07T18:56:01.532+05:302012-09-07T18:56:01.532+05:30You shud go ahead and name the dubious companies.H...You shud go ahead and name the dubious companies.Having worked in the Indian market you have got it wrong that Bombay club has any ethics.They have decided what the rules of the game are.Fairplay allows new players to emerge.Until the time who you know matters in getting jobs(senior) and mistakes are not allowed(risk taking) we will continue to be copycats and not produce a single notable consumer global brand.This problem is so acute that I cannot think of even one company's single risk taking decision(in Bombay,it does happen in IT/BPO/KPO in B'lore) in the last ten years even at junior levels and yes Nano was a big failure & not innovative enuf.<br /><br />You are correct to an extent about self correcting mechanisms of market to weed out crooks but its right now weeding out out and out criminals not crooks.We havent yet mentioned the rigged nature of stock market or tamasha of P-notes and real estate mess.<br /><br />No,I ask you to think again;dont just pick out one or two things from here and there and paint a rosy picture.We are in deep shit and not getting out of it anytime soon.Anonymousnoreply@blogger.com