Nm values in m & s part 5 What’s happening around Exercises

NM Values in M & S Part 5 What’s happening around

Exercises

• Recall what you know of from what you have seen, read, heard etc. of CSR / CG / Value related events.

What is happening ?

• From the next few pages, we will see evidence of why Business Enterprise or a Corporation should merge with society and other stakeholders in the community

• Examples here are from Headlines, highlights, coffee corner debate, flow of SMS s, media reports, etc.

• Will include what is going wrong today with India and the world? And global economy?

• At the end of it, can we say that we re not learning our lessons?

• We should try and answer this question to guide our future actions and behavior.

Some wise sayings

• WHO IS RESPONSIBLE FOR POOR SOCIETAL VALUES?

Arthashastra

• “In the Happiness of his Subjects lies the King’s Happiness and in their Welfare, his Welfare”.

• Kautilya’s Arthshastra

• Today we have “Kings” in the garb of politicians …business barons, not good old kings like

Who is a Customer – Mahatma Gandhi

• A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him. He is the purpose of it. He is not an outsider to our business. He is part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us the opportunity to do so”

• A simple lesson for any Business Enterprise – customer is anyone whom you have to serve.

• Quality definition by Philip Crosby:

• “ Quality is respect to humanity”

One world, one citizen

• In the South American mini-forest, there is a tribe called the Desana, who see the world as a fixed quantity of energy that flows between all creatures.

• Every birth must therefore engender a death, and every death bring forth another birth. This way, the energy of the world remains complete. When they hunt for food, the Desana know that the animals they kill will leave a hole in the spiritual well.

One world, one citizen

• But that hole will be filled, they believe, by the souls of the Desana hunters when they die. Were there no men dying, there would be no birds or fish being born. The closer he gets to good bye, the more he seems to feel we are all creatures in the same forest. ……what

The Desana story - Lesson

• WHAT WE TAKE, WE MUST REPLENISH.

• “ IT IS ONLY FAIR” that we provide sustainability” – The way we live, at least, must be made available to those who follow us”

Selfishness .. What is the end?

• People are only mean when they are threatened, and that’s what our culture does. That is what our economy does. Even people who have jobs in our economy are threatened, because they worry about losing them. And when you get threatened, you start looking out only for yourself. You start making money a god. It is all part of this culture. ….

Selfishness ..and the end

• Look, no matter where you live, the biggest defect we human beings have is our shortsightedness. We don’t see what we could be. We should be looking at our potential, stretching ourselves into everything we can become. But if you are surrounded by people who say “I want mine now.” You end up with a few people with everything and a military to keep the poor ones from rising up and stealing it.” (any visible examples?).

• If not for the fact RESOURES R SCARCE, everything will be hunky dory.

What is wrong with being No.2?

• In a basketball game, a team was doing well, and its supporters began chanting “We are number one, we are number one”. One person was puzzled by the cheer. He rose up and yelled “What is wrong with being number two?” The partisan crowd stopped chanting. The person looked triumphantly. After all it is only a game, where one is supposed to give his best. (no animosity)

Concern for others – goodness of collaboration

• It is not just others we need to forgive. We need to forgive ourselves too.

• In business people negotiate to win. They do that to get what they want. Maybe we are used to that.

• But look, how different it would be, if you are concerned about someone else’s situation or as you are about your own. YOU CAN STILL MAKE IT A WIN-WIN SITUATION.

• Good Businesses with Long Term Strategies achieve that -- collaborate

Business & Society – the cyclical phenomenon waves

• This story is about a little wave, bobbling along in the ocean, having a grand old time. He is enjoying the wind and the fresh air – until he notices the other waves in front of him, crashing against the shore. “My god, this is terrible,” says the wave. “Look what’s going to happen to me!” Then along comes another wave. It sees the first wave, looking grim, and it says to him, “Why do you look so sad?” …..

Business & Society – the cyclical phenomenon - WAVES

• The first wave says, “You don’t understand! We’re all going to crash! All of us waves are going to be nothing! Isn’t it terrible?” The second wave says, “No, you don’t understand. You are not a wave, YOU ARE PART OF THE OCEAN. (little drops of water…), and waves come and go, but never lose your PEACE – SANTOOLAN mat ko bhaitna”

A Story – potential class conflict

• This is a story of

• A wealthy family (NRI in India now) staying on the 7th floor of a posh Malabar Hill apartment, and

• The “coolie”, and

• The “Lift”, and

• The Fridge (luggage)

James Baldwin on Bus & Society

• ..for nothing is fixed, forever and forever and forever, it is not fixed;

• the earth is always shifting, the light is always changing, the sea does not cease to grind down rock.

• Generations do not cease to be born, and we are responsible to them because we are the only witnesses they have.

• The sea rises, the light fails, lovers cling to each other, and children cling to us.

• The moment we cease to hold each other, the sea engulfs us and the light goes out.

The Debate on US Bailout

• We are not troubled – isolated from worse –

• Is that good news?

• Fact is (BT) Indian financial sector is nowhere near as reformed as it should be, resulting in sub optimal allocation of resources and high operating costs. To celebrate isolation, is to worship at the altar of a very mediocre status quo, as the opportunity cost (less visible now) of not reforming is infinitely higher than the actual loses that may indirectly result from reforms.

Financial market reform – cross benefits, Yes.. but

• Financial market reforms, like pension, insurance, banking etc. has been dragging its feet. Invariably these result in greater economic activity – multiplier effect, lifts the living standards of individuals not even remotely connected to the sector. Example, a boost to the insurance sector will make -- more funds available for infrastructure projects, which will benefit everyone from the tycoon, who implements the project, to those sections of society whose lives become easier as a result of better infrastructure, to daily laborers who get assured work for longer periods of time.

Is it individuals’ honesty?

• Distinction needs to be made between institutions and individuals.. Right institutions or instruments in the hands of wrong individuals can lead to disastrous consequences. (US situation partly explained by this... )

• So, regulation – as distinct from micro management (as in India), has a lofty place in the world. It is nobody’s case that Indian markets should be reformed to benefit the investment brokers and bankers and other moneybags who so visibly gain from such initiatives. We must reform our financial infrastructure so that the housewife in some small town, the laborer at a road building site and the vegetable seller at the street corner can also look forward for a better tomorrow.

US bailout

• Some Congress members questioning Fed Reserve chairman on why they did not get more global support -

• “ I think it is a perverse pride thing… we don’t ask for help. We are the big, strong father figure. But let us be realistic. We are no longer the dominant world power

• ”Is it a confession? World inter-action (especially business should note).

US melt down

• Lehman, AIG, WaMU, Bunty or Bubli (Fenni & Freddie Mac)

• Merryl, European Banks, Japan, Indonesia, etc.

• “More corporate on bankruptcies list come to the fore”

• “A 14$ Tn economy is on its knees for $700 million”

• (Senate/Congress debate)

US bail out-- “taloa me pani nahi”

• Some saw this as an enormous set-aside of Taxpayer money as an unnecessary intrusion into free market.

• Voters will hit back Senate members who vote for bail out. They would be targeted and defeated .

• if they stand side by side with predatory politicians and bureaucrats and their greedy friends whose job we are in this mess.

• - If, Right wing ideology of anything goes,

US meltdown – No – to first vote

• Came about . Due to .. of no supervision, no discipline, no regulation of financial markets”, the setback led to a global financial crisis

• Economy, Fell like nine pins

• Bailout defeat – why the US voted the way they did goes to the heart of battle between two streams of thought in America now”

US bail out

• Michael Moore, the iconoclastic film maker, calls it “the biggest robbery in the history of this country”, and says “that no guns are being used, 300 mn hostages are being taken”

• They say bail out – we say get the hell out (worst than terrorists?) – already 1 US + family of 4 suicide).

• My interaction with Harshadbhai, Ranina +++

Comment on bailout

• Big banks, financial institutions and lenders who admittedly lent money recklessly during housing boom need to be scared with capital infusion, because their situation has scared others into withholding credit which is the lubricant which drives the American economy. “asking for $700 bn b/out moves without accountability to Wall Street “richies”.

• INDIA SEES THAT NOW !!! Bandra Kurla

Comment (contd)

• ..”After stealing a half trillion dollar to line the pockets of their war-profiteering hackers for the past 5 years, Bush and his cronies – who must soon vacate, the White House are looting the US treasury of every $ they can grab. They are swiping as much of the silverware as they can on their way out to the door”

Points – lesson from Meltdown

• Finance cos. They need much to build a robust system – frequent check, reliability, review, recoverability – to safeguard their assets than a Company with tangible assets need

• ”Value of intangible asset – difficult to trade (Mfg)

• Requires a lot of character on Managers, directors, auditors who are involved in managing systems

• Only a naïve like Lehmann would have fallen on the way out … the process of insolvency would have set a long before. (or were they naïve??)

• Was it vested interests, that prevented “bringing this out?”

Lessons to learn from US md

• Volatility of market situation “makes it difficult for truth to come out early”

• it is a lesson that “big is not only always the best” Hypes mis-guide you.

• Reliable flow of timely information is the key. Any investment is only a value held. (BOOKS)

• At the end of the day they are prone to changes.

• “CHARGING BULL – RED BULL”

Seeking Help – US meltdown

• “If he can sell a formaldehyde pickled sheep with gold horns for millions while Lehman goes under, perhaps it’s time for everyone to help a little when Americans get fleeced”

• CSR – extending to world community?

What’s happening today

• Let’s look at some happenings most of which are in one way or another relevant to discussion of CSR and CG.

Govt. not to regulate CEO salary, said Corp. Affairs Minister: We believe in essential freedom in a democracy.

• Ultimate decision should rest with Shareholders. Existing Co.Act mandates govt. approval before raising salaries of Directors beyond a threshold of 5% of annual profit, and raising more than 11% for total remunerations of managerial positions. The Minister said the Parliamentary Standing Committee, scrutinizing provisions of new Companies Bill that has been tabled in the LS would be looking into the issue of CEO remuneration as well as spends on CSR. “These issues need to be debated threadbare for their incorporation in Bill 2009. On voting issue the Minister said 3rd Wk of Dec. India Corporate Week.

Govt. not to regulate CEO salary, said Corp. Affairs Minister: We believe in essential freedom in a democracy.

• Next year “Year of Investor Education. The e-voting system launched by Control Depository Service India Ltd. Which will empowe3r shareholders to participate in the decision making process of companies thus making their vote count. “Companies would also benefit from this as the remote voting process would become quicker accurate and would also result in savings on various cost overheads which are currently incurred for postal ballots.”

What.. (contd.)

• Winston Churchill remarked that the “Hun” – his disparaging term for Germans) was either at one’s throat or at one’s feet, a vicious adversary or a worshipful devotee.

• Moderation in emotional response is said to be the hallmark of maturity while emotional polarity – between euophoria and despair, love and hate, is a sign of immature adolescence.

• We as a nation: either over the top adoration, and our equally unreasoning and unreasonable hostilities.

• e.g. Sachin, MF Husain, Sania Mirza feted as iconic genius, equally disparaged for variety of reasons.

• There is an increasing climate of intolerance and hatred permeating Indian society.

• Same coin – Homage and hatred (courtesy: Jug SaraiyaP

Women use 500 chemicals on face & body every day – A Question of product claim

• Most of which contain more than 20 ingredients including additives that could lead to cancer and various skin problems. – A study of deodorant firm Bionsen.

• Beauty regimes have changed fro m “wash and go to daily fake tan applications, manicures, false lashes and hair extension.

• Lipstick, most commonly used, contains an average of 33 chemicals. Perfumes contain a cocktail of 200 chemicals with soe containing as many as 400”.

What’s…

• Jawans spend second night in pavement

• Security van driver flew with Rs.40L ATM

• HC slams Delhi govt. for giving selective parole

• TN prisoners grow fat on jail food

• Ranbaxy recalls Acne drug from US mkt Class III

• India can get Nobel for filth – J.Ramesh

Clear the Air – editorial ToI 20-11-09

• Govt. announced a revised set of emission and pollution standards applicable across the country. Govt wants us to breathe easy. But noble intensions alone will not ensure fresh air. A/g to CPCB almost 80% of 110 cities monitored in the country do not even meet the existing norms. Because they do not provide penalties to be imposed on defaulters. Which is where credible and accurate monitoring levels comes in – unfortunately we are crippled in this regard. Models in UK and Europe and US (EPA) works with federal state and tribal governments to ensure compliance. Where environment agency and dept of env food and rural affairs issue guidelines and give muscle to local bodies. So Agencies should spell out specific targets. Otherwise new norms will only give a feel good factor.

What is …

• Farmers fake Bt Cotton as organic US, EU see red.

• Commerce Ministry tracks fraud in MP, Maharashtra through new software.

• Cases of Bt. Cotton contaminating organic cotton farms are on the rise.

• Adequate testing facilities lacking. “We are working with customers to see tht every consignment is checked.”

• Needs coordination between certification bodies, their inspects, farmers, NGOs, govt. representatives, “ monitoring and feeding information”

What is…

• Mahindra-Satyam gets legal notices from 37 cos. Mahindra-Satyam says it is legally untenable.

Greatest mystery of all times and climes : SCAMS – where do the money go??

• What has happened to all the money that gets unearthed in Indian scams? Frauds?

• Everytime a new scam is know, the sum of the scam is in multiples of earlier scams.

• Bofors ?? 25 years? “ ONLY” (like you say in AB’s Emami pain relief ad) 60 cr

• 4000 cr. Harshad

• 7800 cr. Satyam fraud

• Madhu Koda – 4000 cr (slight decrease)

• 20000 cr. – Telgi fake stamp.

• How nice it would be if at least part of it is unearthed and some of our deficit financing can be eased out.

What’s …

• If you want to know what has happened to these:

• Just send 5000 bucks in unmarked used 100 rupee notes and you will receive a sneak preview of the devastating denouncement by return post:

Consumer Watch Drive to make detailed servicing report a must:

• An Ahmedabad consumer based CE&RC plans to launch a campaign to make detailed service reports compulsory.

• Even Whirlpool and Philips said they do provide repair details on receipts, however, no uniform rules.

• “There are no mandatory laws governing service obligations of manufacturers, not just of electronics, but all products”

• “As a customer I would like to know what was wrong (with a product), if the same problem recurs after warrantee”

• It is therefore necessary to have a report recording a product’s history.

Drive to make detailed servicing report a must

• Normally the service centre could blame the recurring problem on rough handling of a product or voltage fluctuation.

• “If a product is repaired by an authorized service person, the fault should not occur. If it goes back it amounts to a deficiency in service and shows there is a problem with the product. Then the consumer must take up the issue to a higher level”

Let host nation regulate foreign finance

• India’s system of host regulation, which makes good economic sense has both empowered and insulated the economy from some of the worst excesses of current global crisis:

• Currently FI lending is partial; It is not on a level playing field. Developed countries have easy access, and cost of getting funds is much less than for developing countries.

• The effect on the economy again is therefore has unequal effects.

• Even Base II norms favor this.

Let host nation regulate foreign finance

• A host regulator cn ensure that certain institutions are not lending recklessly in a manner that leads to artificial asset booms. Host regulators can enable counter cyclical charges on institutions creating such book within a broader framework of national and macro prudential regulation. So that they are both empowered and insulated the economy from some of the worst excesses of the crisis.

• DEvelping economies must make their own choices in the world economy.

• Global warming, WTO, climate change !!! Disparity Haves and have nots

Some paradoxes – in the Corporate World and their thinking.

• Business – wants freedom, and less intervention from Government

• They start ventures taking RISK.

• NOW ANYBODY CAN START ANY BUSINESS.

• AFTER ALL THEY WILL BE BAILED OUT.

What is …

• Global meltdown – Bail outs in trillion dollars

• AIG, LEHMAN SUDDENLY FIND THAT THEY ARE BANKRUPT !!!

• SATYAM BECOMES JHOOTA (juta nahi)

• MADHU KHODA AND HAWALA

• LAW MAKERS – LAW BREAKERS

• 3 AUTO GIANTS – WALK

• COMMON WEALTH GOAL (CWG)

• KAMAO WEALTH.. CW ghoos!

Squeeze at Top (headcount & wages)

• A clutch of CEOs resorted to pay cuts in a tough year. Not all head honchos, however, were in such a spartan state of mind.

• Rahul Bajaj

• To the extent govt finds that CII or any other business organization does not come out with a satisfactory volntary code of conduct for remunerations of CEOs, I believe govt. could keep in the Companies Act a cap on emoluments of Promoter CEOs as a percentage of net profit of the co,. Currently, for an individual CEO the figure is 5% and for the Board as a whole, 11%. The figure of the individual CEO, if he is a promoter, may be fixed at 1 percent of the profits of the co. as calculated at present. However, a promoter CEO may be allowed a certain minimum emolument per annum in case of absence of inadequacy of profits in a company.

What’s….

• Vijay Govindrajan, Prof. of International Business.

• Reverse Innovation is the Key: Re-engg. Is passe

• Since 50’s MNCs have innovated in the US \However, one can develop over the next 100 years with technology that is available today. E.g. Cell v landlines today. The trajectory of dev. Need not be the same.

• –RENEWABLE ENERGY, DECENTRALIZED POWER GENERATION AND AFFORDABLE HEALTHCARE ARE GOOD EXAMPLES OF SUCH BUS. OPP.

• In the half century after the II world war, the business corporation has brilliantly proved itself as an economic organization.. In the Next Society, the biggest challenge … may be its social legitimacy: its values, its mission, its vision”.= Peter Drucker

What’s…

• Moists – liberate people from exploitation and oppression – fight against state terrorism – Salwa Judum – legitimate efforts??

• Fearing taunts, old dad dumps baby (45 year old)

• Sky Walks galore

• 25% city women have caesarean.

• CASUAL – careless – calamities – collapse

• Vegetables injected

• Post Office- receives cards with AID virus

• Patangrao Kadam – Rev Minister, land etc. release to BVIDYAPEETH.

What is…

• CII AND INDUSTRY WITH B. BOWLS ONCE AGAIN

• MONSOON FAILURE

• SOCIAL CIVIC UNREST AX INDIA – WAR WITH INTERNAL TERROR

• EXTERNAL TERRORISM

• DEFICIT FINANCING

• NOKIA – REPLACES CHARGERS (3rd party!!)

What is…

• Hadley seen in Lucknow, Trident Mumbai

• SEZs – Monsanto & Dupont – accused of pressure tactics.. NOW VEDANTA

• Nano at Gujarat – shift from WB .. The NDTV debate

• Tata seeks capital to pay off its Corus deal

• M&A in some sectors

• Globalization – end of the road?

• PWH – SUIT 1 FILED IN USA

• Kingfisher flight – skids off the tarmac

What is.. Casual and careless

• Delhi Metro – trembles – now, Games Bridge ?? Army builds in 7 days – Delhi CM special photo in media!!

• Pipeline falls on Train

• Milk – and Asli Ghee? Quality?

• Product claims questioned

• Cultural Issues

• Hypes – Anoraxia – Aamir – Aids

• RANBAXY – US FDA questions GMP issues

• Banks not lending -- NPA

What is…

• Farmers suicide – Water shortage

• Global warming – Climate change

• Himalayas – getting taller? or over a heap of plastic piles -- cans and wrappers?

What is…

• Foreigner’s stake in India more than government holding

• Tax exemptions cost govt. Rs.4.2 Lakh crore in 08-09

• Overstated revenues in Books to inflate stock prices – (e.g. if Co. says profits are up, but NFMs are down something is wrong)

• So, Answer, evaluate things that are verifiable, if complex tax systems unables to evaluate to create a new warning system to track corporate frauds.

• WTO – US – Europe Attitude –

• Gl Warming – war between D & UD economies – does it ring a bell – a parallel – “Haves & Have nots”

Today’s ToI (6 Oct ’10)

• Watchdog (ASCI) pulls up cos. For misleading ads:

• Reliance Comm: unlimited talk time*

• Parle Agro – lemoni lemoni - rascism

• Volkswagon – Polo – portrayed violence against animals

• J&J – sanitary napkin

• Tide & Surf, Complan & Horlics

What is…

• Pfizer charges SUN with another patent violation.

• Kathakali came to be known in Kerala after Moscow presented it.

• Karela & Neem importance known to us after some one else gets a patent.

• Story of Hospital, Stapler & courier.

• AI gets 2K crore lifeline

• A

What is…

• In 2009, CBI graft cases doubled. Trapped govt. officials for corruption (Railways, IT, FCI, Banks) 17 t 40 (26 from Mumbai)

• Rich or poor – cit kids malnourished – proteins missing

• 17 year old held for luring girl into ….

• PM Manmohan Singh --- patient death during security…

• P.Dinakaran – High Court Judge – Land at Tiruvalluvar

• Good – 2 supreme court judges quit Ambani dispute – Conflict of Interest

• IT slueths break fellow officer’s safe to steal files

• Drunk flier gets too close to an airhostess.

• Teenager steals dad’s cash to marry

• Mira Road – sick of garbage, they dump it at the ward office.

What is..

• Montac Blank Rs.14 L – used a sketch of the Mahatma. Kerala HC banned

• Issue: how free are cos. To use the image or name of a iconic historical personality.

• Legal experts – not a problem if due permission is taken. - T.Shirts

• Cos. Shd check with intellectual property lawyers before such launches

• The subject of Gandhi is an emotional issue. The Judge may no take a deached view, as a TM will lead to commercial gain.

• Tend to attract objections that are gimmicks to gain publicity.

• K.Johar .. Kaminey

What is..

• UID – will not resolve bad delivery of public service, or alleviate poverty. Of course, will give unique ID nos. Using UID for fixing governance issues will be up to the public service providers.

• PORTABILITY OF MOBILE NOS. Will push s p to improve service quality – gives freedom to switch operator

• Q 09 indicates a recovery, but is it just a festive flash in the pan.?

• Good signs: Salary hike, uptick in pricing, lateral hiring.

Why co’s fail…

• What is S?

• Sustainability is the mother lode of innovation that yields both bottom and top line returns

• Sus. Dev. – global warming, water shortage, high commodity prices – don’t deny the obvious – get on with it and innovate.

• 30 years ago – Quality movement – That raised a debate – will it increase costs, -- but really it reduced costs, brought products innovative, used technology –

• Look at sustainability not from a compliance and regulations objective – consider it as an opportunity and innovate -- TAKE IT TO THE U.S. !

• Washing machine when electricity is cut off runs into wash cycle mode.

• Inclusive growth and sustainability joined at the hips

• How to do more and more for people with less and less.

Why co’s fail…

• Fannie Mae – was good to great – it is under Government conservator ship – which is close to bankruptcy, They may call it a “sectoral” catastrophe – went through some of the above waves. As a lender increased response to sub prime mortgages which it had rejected earlier to stay relevant, and serve low income business.

Why co’s fail…

• Who does great, or not, is not a function of forces that hit them, but self created and self inflicted.

• Strategy starts with people. Assess, if it is advantages to themselves, or bigger than themselves. E.g.:

• Casualties causes calamity – Delhi Metro, IOC inferno, Bhopal, Mulund train, Kingfisher, etc. Carelessness leads to downfall.

Today 10 Oct. 2010

• CENTRAL BANK EMPLOYEE – WHISTLEBLOWER

• WITHDRAWS CASE AGAINST

• RETIRED CEO & MD Ms. DARUWALA

• WHAT IS THE PROTECTION ??