Sunday, November 19, 2017

Moody's revised rating for India

When a borrowing company gets a better rating from a recognised credit rating institution, two consequences follow: 1) the lender, say the bank, reduces the rate of interest charged to the borrower because the borrower is now considered to be a bit less risky and 2) more lenders may come forward to lend to the borrower or the present lender(s) may get ready to be a little more liberal in the quantum of loans.

When international credit rating institutions upgrade the ratings of a country, the consequences are the same. How people react to such revisions in ratings depends on where they come from. A politician will react differently from an economist who in turn will react differently from an objective layperson.

It is helpful to understand the implied meaning of a rating or its revision. Moody's adopts 9 overall gradations in its rating scale. These are, in descending order of credit quality, Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C. In addition, to indicate marginal variations within a particular rating / symbol, numbers 1,2 and 3 are used as a suffix for ratings from Aa to Caa.

Thus, A is better than Baa in terms of credit quality (better the credit quality, lesser the attendant credit risk.) Similarly, Baa1 is of better credit quality than Baa2 which is better than Baa3. Though Baa1 immediately follows A3 and Baa2 immediately follows Baa1, the difference in credit quality between A3 and Baa1 is more than the difference between Baa1 and Baa2.

Baa is considered significant because any rating Baa3 and above (that is better) is supposed to signify that the rated entity (company or country) is worthy of being invested in. Thus, the ratings from Baa3 to Aaa are treated as 'investment grade'; in the other direction, Ba1 to C are considered as 'speclative grade' or 'junk grade'.

Credit rating is additionally qualified by what is called as 'outlook'. Outlook may be positive, stable or negative. These in turn indicate the probable direction in which the rating is likely to move in future. For instance, Baa3-positive means that the rating has reasonable chance of getting upgraded during next revision. This is only an indicator based on current expectations. Baa2 -stable means there is unlikely to be a revision in rating foreseeably.

Moody's have upgraded India's rating from Baa3 (lowest investment grade) positive to the immediate next better quality Baa2 stable. This is a big deal or not depending on one's political inclination.

Announcement of ratings is accompanied by release of rating rationale. This justificatory statement is nuanced enough to enable politicians to pick and choose certain sentences to support their parochial viewpoints.

The Congress party can quote the following:  "A material deterioration in fiscal metrics and the outlook for general government fiscal consolidation would put negative pressure on the rating. The rating could also face downward pressure if the health of the banking system deteriorated significantly or external vulnerability increased sharply."

However, BJP can highhlight the following: "The rating could face upward pressure if there were to be a material strengthening in fiscal metrics, combined with a strong and durable recovery of the investment cycle, probably supported by significant economic and institutional reforms. In particular, greater expectation of a sizeable and sustained reduction in the general government debt burden, through increased government revenues combined with a reduction in expenditures, would put positive pressure on the rating. Implementation of key pending reforms, including land and labor reforms, could put additional upward pressure on the rating."

The purpose of ratings of countries by credit rating agencies is to enable international investors to decide where to invest. Trivialising the process to score political brownie-points is only despicable political opportunism.

Sunday, November 12, 2017

Arun Jaitley's complicity?

This is copied from www.pgurus.com

"For the past three weeks, a huge tussle is going on between the Enforcement Directorate (ED) and certain corrupt and pliant persons in the Finance Ministry under Minister Arun Jaitley. All the people in the corrupt ecosystem of Delhi are baying for the blood of ED Chief Karnal Singh and ED’s Joint Director Rajeshwar Singh after decisive action against former Finance Minister P Chidambaram in the Aircel-Maxis scam and Congress leader Ahmed Patel linked Sterling Biotech, caught in Rs.5000 crore bank frauds.
Prime Minister Modi speaks day in and day out on acting against corruption and such questionable calls by Jaitley is creating doubts in the minds of many.
Last week the ED officer Rajeshwar Singh approached Supreme Court for protection from anonymous complaints. ED Chief Karnal Singh wrote to Revenue Secretary Hasmukh Adhia against actions on frivolous complaintsagainst honest officers of the ED. It is reliably learnt that Adhia was forced to act on the anonymous complaints because of pressure exerted by Arun Jaitley. If this is true, then the Finance Minister Arun Jaitley must explain why.
Prime Minister Modi speaks day in and day out on acting against corruption and such questionable calls by Jaitley is creating doubts in the minds of many.
Further, it is reliably learnt that many Gujarat cadre Indian Administrative Service (IAS) and Indian Police Service (IPS) officers are trying to pull wool over Prime Minister Modi’s eyes on actions started against Ahmed Patel, a fellow Gujarati. These officers appear to be clever with Modi while maintaining their secret links with Ahmed Patel, who used to pull the strings till May 2014.



Central Bureau of Investigation (CBI) Director Alok Verma has now openly come outagainst Gujarat cadre IPS officer Rakesh Asthana, after his name was found in the monthly payout diaries seized from Sterling Biotech. Now CBI has registered two First Information Report (FIR)s against Sterling Biotech where the first FIR mentions the role of Ahmed Patel’s son-in-law Irfan for bribing accused Income Tax officers. The second FIR is for a Rs.5000 crores bank loan fraud. It is a mystery as to how Asthana continues to be in CBI, when hisname is found in the accused company’s bribe payment diaries! Moreover, the banks under Finance Ministry have not acted on the Rs.5000 crores fraud by Ahmed Patel’s companies.
Asthana who handled Agusta Westland case has now diluted it making only Air Force officers as accused. Till date Sonia Gandhi or Ahmed Patel, the key players in the Agusta Westlandcase was not questioned by CBI, though the Italian Court judgment detailed their role. PK Mishra, the Additional Principal Secretary in PMO is behind the illegal promotion of Asthana, even after CBI Director objected. PK Mishra is also a Gujarat cadre officer and controlling all senior appointments and promotions. This veteran officer was a close confidant of Sharad Pawar and served as Agricultural Secretary during UPA tenure. It is a known secret that PK Mishra plays his own games in the everyday tussle between Shiv Sena and BJP to protect the political mileage of his old boss Pawar. The question is why Mishra is protecting Asthana, whose name was found in Ahmed Patel linked company’s diaries. Do both these Gujarat cadre officers have secret deals with Ahmed Patel?
Back to Arun Jaitley. The ED is totally under Revenue Department (always looking for new sources of revenue) in the Ministry of Finance. ED summoned Chidambaram’s son Karti in two cases and till date, he has not yet appeared. Why has Karti not been arrested? Thebuck stops with Arun Jaitley.
Why is he keeping quiet while an honest, efficient officer Rajeshwar Singh is facing hardships for attaching Karti’s properties in Aircel Maxis scam? The Income Tax  Department (ITD) is also under Arun Jaitley. On Subramanian Swamy’s complaint Prime Minister Narendra Modi has ordered the ITD to probe into Chidambaram family’s illegal assets in 14 countries and Karti and his firms undeclared 21 foreign bank accounts under the new Black Money andBenami Act. Modi ordered in June 2017 and till date, the ITD too has not arrested Karti.
Mr. Jaitley has much to answer – his inactions in moving against Chidambaram, son Karti, Ahmed Patel and son-in-law Irfan"

Chidambaram's tentacles?

This is copied from www.pgurus.com

"The Supreme Court on Wednesday (Oct.25th, 2017) barred all “illegal and dubious” probes against Enforcement Directorate’s Joint Director and 2G cases Investigating Officer Rajeshwar Singh. In his petition, the ED officer said that some anonymous complaints were filed against him after he attached Karti Chidambaram’s bank accounts and properties in Aircel-Maxis scam. The Bench comprising of Justice J Chelameswar and Justice S Abdul Nazeer issued a notice to the Central Bureau of Investigation (CBI), the Enforcement Directorate (ED) and the Government of India to reply within three weeks and directed no action would be initiated against Rajeshwar Singh till Court’s approval.
Rajeshwar Singh’s advocate Gopal Sankaranarayanan highlighted the hardships faced by Rajeshwar Singh for the past five years. Supporting the petition, BJP leader and 2G cases petitioner Subramanian Swamy told the court that Rajeshwar Singh is an “honest officer” and Court should protect such honest officers targeted by corrupt politicians. Another petitioner Prashant Bhushan also supported the petition.

First, a set of complaints were registered against the ED officer in 2010-2011 when he summoned controversial lobbyist Nira Radia. The Supreme Court had trashed all the complaints and ensured protection to the investigating officer in 2011. During the UPA’s tenure, Chidambaram as Finance Minister did all dubious activities to shunt Rajeshwar Singh from ED and his attempts were failed after BJP leader Subramanian Swamy approached the Supreme Court. The officer joined ED in 2006 from UP Police Service and was absorbed in the ED by the Union Public Service Commission (UPSC). But in 2012, the Finance Ministry under Chidambaram rejected the absorption for some mysterious reasons. Rajeshwar won the case in Central Administrative Tribunal and all other forums. The Finance Ministry under Arun Jaitley and officers like the then Revenue Secretary Shaktikanta Das tried every trick in the book to shunt the officer from ED, who was reporting directly to the Supreme Court-monitored 2G and Aircel Maxis scam.
At one point, the Finance Ministry under Arun Jaitley lied in the Supreme Court that all probes in Aircel-Maxis probe were over and that Rajeshwar Singh should be transferred. In September 2014, on Swamy’s petition, Supreme Court ordered permanent absorptionof Rajeshwar Singh in three days. Even after the Supreme Court’s order, the Finance Ministry conducted a service case against the officer. His promotion as Joint Director wasdelayed for more than three years.
Rajeshwar Singh in his petition to the Revenue Secretary Hasmukh Adhia said that all these are frivolous complaints after he attached Karti Chidambaram’s properties. Recently after the attachment of Karti’s properties in Aircel-Maxis scam, all the enemies of Rajeshwar Singh ganged up and started filing anonymous complaints against. Their motive was to harass the officer and prevent his due promotion as Additional Director."

Supreme Court

The oft-quoted observation of Justice M.Patanjali Sastri in State of Madras vs V.G.Row, Union of India, and others that "Supreme Court has the role of a sentinel on the qui vive" has been perversely perceived by the present generation of judges. Scholarly Sastri meant that the court should eternally be on guard to protect citizens' rights. CJI Justice Dipak Misra seems to have mistaken it to mean that the court ought to jealously protect the interests of the judges.

How else can one interpret CJI's egregious violation of the first principle of natural justice that "no one shall be a judge in his own case" (Nemo judex in causa sua) ?

There is a pending petition of one Prasad Education Trust (PET) in the Supreme Court. It is up for hearing in the court presided over by the CJI. Meanwhile CBI arrested Justice I.M.Quddusi formerly of the Orissa High Court and some of his alleged co-conspirators on the allegation that they were conspiring to subvert justice by bribing judges in the PET case. So there is an allegation, however far fetched or truthful it may be, that the CJI and may be some other judges are sought to be compromised.

Senior advocates Prashant Bhushan and Kamini Jaiswal smelt blood in this development and started playing their card. We will visit this a little later. Before that let us see what the Bhushans think of Misras.

Shanti Bhushan who was the Law Minister during 1977-79 is an eminent lawyer and is Prashant Bhushan's father. In September, 2010 Shanti Bhushan presented a list of 16 judges who he alleged were probably corrupt in an open hearing in the Supreme Court and dared the court to punish him for contempt. (Needless to add , he was not punished lest further skeletons should stumble out of the cupboard.) The list was topped by Justice Ranganath Mishra who was the CJI during  1990-91. The present CJI Justice Dipak Misra is Ranganath Mishra's nephew.

Way back in the year 1979 when Dipak Misra was a practising lawyer, the Orissa government allotted to him 2 acres of land on lease. Dipak Misra, in order to be eligible for this lease, had falsely declared that he was not owning any land. This impropriety was highlighted by Shanti Bhushan in an article he wrote in thewire.in in August 2017 to forestall the possible appointment of Justice Dipak Misra, the then second senior-most judge in the Supreme Court, as CJI . However, Misra took charge as CJI on August 27.

An NGO, Campaign for Judicial Accountability and Reforms (CJAR), filed a petition in the Supreme Court pleading for converting the CBI case in the Prasad Education Trust issue into a court-monitored SIT case. The case was argued by Prashant Bhushan pleading that the case be heard by a larger Bench but without the CJI since there was apparently an allegation against him. Subsequent to the admission of this petition, Kamini Jaiswal's petition seeking a similar remedy was mentioned in the court of Justice Jasti Chalameswar who is next only to CJI in seniority. Justice Chalameswar took cognisance of the seriousness of the issue and ruled that a 5-judge Bench should hear the case and that five senior-most judges would be on the Bench (this obviously includes the CJI also). The five senior-most judges are the CJI, Chalameswar, Ranjan Gogoi, M.B.Lokur and Kurian Joseph. Surprisingly, but significantly, the latter three judges do not figure in the controversial development so far. (It is interesting at least as an aside that Dipak Misra and Chalameswar were appointed to the Supreme Court on the same day, Oct 10, 2011.)

Chalameswar's decision to constitute a 5-judge Bench was over-ruled by a 5-judge Bench consisting of the CJI, Justices R.K.Agrawal, Arun Mishra , Amitava Roy and A.M.Khanwilkar. CJI also ruled that this 5-judge Bench will hear the petitions of Kamini Jaiswal and CJAR. This august Bench has held that the CJI is the master of roster and therefore he alone can decide which case would be taken up by which Bench. Such a scrupulous Bench which is respectful of court procedure is also expected to defer to principles of natural justice and keep the CJI away from a Bench which looks into issues involving him.

We can expect more fireworks from the Supreme Court in the near future. A recent cartoon regarding the American Congress says that what was meant to be an institution of checks and balances has become an institution of only checks (cheques). It is hoped that our Supreme Court will not reduce itself to be similarly portrayed. 

Wednesday, November 08, 2017

Rahul Gandhi's views

Rahul Gandhi has expressed his (?) views on Indian economy and Modi in a brief article titled "Modi's reforms have robbed India of its economic prowess" in the Financial Times.

He rightly concludes that fear might have brought Modi to power but it will never create jobs and make our country fit for the 21st century or fix India's institutions. He has quoted CMIE's finding that 1.5 million Indians have lost their jobs in the first four months of 2017. The cause for India's present economic malaise, according to Gandhi, is the double whammy of Demonetisation and GST. He has also said that China creates 50,000 jobs every day whereas India creates only 500.

Figures do not lie. Gandhi has done well in referring to these numbers. However, he gets hoist with his own petard when he complains about emergence of "Licence Raj" because GST Act gives unlimited powers to officials. Has he forgotten, or is he aware, that it was his great-grandfather Jawaharlal Nehru who created Licence Raj in India. Rajaji departed from the Congress complaining that Nehru was creating "Licence-Permit Raj" and emasculating the economy. Socialism and bureaucratic prowess are not Modi's creation.

Gandhi also contends that disenfranchised workers voted for Brexit, Trump and Modi. He blames China's dominance in manufacturing for the plight of workers in other countries. Gandhi implies, but does not admit, that UPA under Manmohan Singh could not protect Indian workers from the China effect. But narrating this as the reason for Modi's electoral victory in 2014 is only a partial story. UPA voted itself out by its culture of corruption which Modi brilliantly exposed in a manner that the electorate would swallow hook, line and sinker.

Gandhi faults increase in connectivity for the rise of Modi who is characterised as a democratically elected autocrat. Reason for Modi's success is identified correctly but it is strange to complain against connectivity. Rajiv Gandhi who played a major part in IT revolution in India would be appalled by Rahul Gandhi's complaint.

There is also the customary Congress conclusion that Modi has damaged India by converting anger created by joblessness and lack of economic opportunities into communal hatred. Whoever wrote the article could have done better.

Monday, November 06, 2017

Narendra Modi meets Karunanidhi

A courtesy call or a Machiavellian meet? Modi's surprise courtesy call on M.Karunanidhi on Nov 6th has a dramatic impact particularly because it was not programmed / announced in advance. Of course, Modi must have had it in mind even before coming to Chennai. Is this why Stalin rushed back to Chennai from Sharjah?

Modi not calling on Jayalalithaa when she was bed-ridden / kept in Apollo was another master-stroke. Had he visited her, questions will now be asked was he aware / part of the apparent conspiracy. Sometimes non-moves are the best moves we make.

Modi does not seem to go by others' advice or information.  He utilised the opportunity yesterday to know first hand 1) if MK is aware of what is happening around him or has become a vegetable like Jaya post-Apollo perhaps was and whether whatever happens to Kanimozhi would affect him or not and 2)whether Dayalu Ammal is really demented as her advocate claimed in the 2G case.

This tendency of Modi not to delegate and trust is normally dysfunctional, but somehow he manages to avoid its negative consequences.

Modi may be knowing that ADMK jokers cannot last long. Supporting the Congress cost the DMK  the prospect of gaining majority in the last general election. Aligning with BJP may keep Kanimozhi away from jail. If DMK  takes centre's (BJP's) help, some ADMK MLAs will decide not to oppose DMK coming to power now.  DMK and BJP  both will gain in the short term. Modi is trying to create a situation that will be beneficial to BJP / centre whether the present government in Chennai continues or falls. Odds I win, tails you lose?

Friday, November 03, 2017

Abhishek Manu Singhvi : Dr.Jekyll and Mr.Hyde?

November 2nd. A rainy day in Chennai. A working day too. Many competing programmes in the city including a conversation between  T.M.Krishna and Perumal Murugan around the same time at a venue less than a km away. So who would attend a talk on Democracy by Abhishek Manu Singhvi? Or so I thought.

The lecture at Srinivasa Sastri Hall on 'The institutional pillars of Indian democracy' by the well-known lawyer-cum-politician was surprisingly well-attended. Gopalkrishna Gandhi, Sriram Panchu and Suhrith Parthasarathy were among the audience.

It was raining cats and dogs outside. This was realised only after the speech was over when one had to return home. The lawyer was dissecting the democratic pillars with surgical precision inside the silent hall. Singhvi referred to 9 pillars , namely secularism, federalism, socialism, judiciary, press, CAG, army, Election Commission and Parliament. Executive was a notable omission perhaps due to want of time.

What enthused the listeners was the totally apolitical approach of the speaker who is capable of spewing venom in any discussion on a TV channel. He eschewed any needless reference to political parties and diligently marshalled his arguments to prove that India is not only the largest but also an exceptional democracy. Similar ex-colonial countries have drifted far away from democracy whereas India continues to be a nuanced democracy though appearing as a functional anarchy.

Gandhi and Nehru, according to Singhvi, ensured that democracy was deeply entrenched in India. Their sequential position, Gandhi first and Nehru later, placed the country in a goldilocks zone to accept, nurture and enhance the features of democracy. He deftly stayed away from the Nehru vs Sardar controversy.

Secularism is not a condescending gift to minorities, but a requirement for sustenance of a pluralistic society like ours. Federalism - or quasi-federalism as it exists in India- is a safety valve that quarantines local problems. Chief Minister of a state, any state, is 5 times as powerful as a central cabinet minister in terms of administrative and financial powers even though they rank pari-passu in governmental protocol. He explained how panchayati raj is coming out of the shackles of benamidars and is becoming reflective of empowerment of women and the marginalised.

Some politicians may be right-wing in non-economic matters but they too are left-wing in their espousal of socialism and concern for the poor and the downtrodden. India's right-wing is far to the left of American left-wing in economic philosophy. Singhvi conveniently ignored the fact that free India was not born as a secular or socialist Republic. These were latter-day political developments.

Delays in judicial appointment have been disabling timely delivery of justice in the country for a long period. Singhvi felt more political will is needed to redress this easily rectifiable issue. When Sriram Panchu tried to trap him on his optimism about judiciary by pointing out that we need a more unpliable judiciary when we have an autocratic leader (Modi?), Singhvi declined to talk about any political leader and without contextualising commented that Indian judiciary is robust most of the times.

Singhvi came down heavily on the media. Paid news, advertorials, incestuous relationship between owners and editors and concentration of ownership were the ills pointed out by him. In his opinion, Press Council of India has failed miserably and is as toothless as Medical Council of India or Bar Council.

CAG was mentioned just in passing. Army must be allowed to be anonymous. Election Commission is our pride and others' envy. Parliament can become more productive if only private members are allowed to initiate legislation, scope of whips is reduced and disruption of proceedings is dealt with an iron hand.

I was happy that the rains did not deter me from attending this lecture.

Tuesday, October 31, 2017

Sensational non-merger: IDFC and Shriram Group

What was flaunted as a $12 billion merger deal has floundered. Dr.Rajiv B.Lall, Managing Director of IDFC Bank, overtly spearheaded the move to merge IDFC group with Shriram Group though it was perceived by the public that the merger would benefit R.Thyagarajan and Ajay Piramal at the cost of IDFC and its shareholders which included the Government of India.

Rajiv Lall, a multi-linguist intellectual who propelled IDFC to be the largest lender in  infrastructure space, has himself to blame for the public fiasco of the sensational non-merger.

Lall known for his articulation and dynamism tied himself in knots on quite a few occasions through his inexplicable flip-flops. Before IDBI Bank was born, he swore in an AGM of IDFC Ltd., that the group would not enter retail banking. Within a year, IDFC obtained RBI's approval to open a commercial bank. In an AGM of IDBI Bank, Lall proudly announced that the bank's business strategy was unique. It would not rely on branch-banking and would rather concentrate on accessing customers through technology. He pacified the Chennai shareholders (the registered office of IDFC is in Chennai) with the lollipop of a branch in Chennai. Later on, he started evincing keen interest in merger with Shriram group ostensibly to enable the bank to manifest through many branches overnight.

Flip-flops, especially if serial, erode institutional credibility and IDFC is paying the price now. Rajiv Lall has gone on record that the merger deal failed because there was lack of agreement on relative valuation of the two groups. R.Thyagarajan, on the other hand, deceptively philosophises that the deal was "never alive to be dead". In his view, "the swap ratio is not all that important in any value creation exercise involving merger of entities." Isn't this too clever a statement?

Rajiv Lall has warned that IDFC Bank's returns for next 3 years would be weakened by the existing load of  high-interest bonds raised earlier by IFCI. This indicates faulty financial planning by IDFC of which Lall was an important decision-maker. Was Lall very keen about the merger in order to obfuscate the real reason for IDFC Bank's continuing performance malaise?

Lall spoke too much about the proposed merger too early. At one point of time he even indicated that he was orally assured of regulatory approvals. It took a long time for the ire of IDFC Bank's shareholders regarding the speculated swap-ratio to impact Rajiv Lall. But once he realised the enormity of shareholders' concern, he was probably looking for a face-saving modus operandi to call it quits from the merger deal. Did he really get one?

Failure of merger deals during discussions or on implementation is not uncommon. But the orchestration of the process by Rajiv Lall should have been more realistic and more subtle. Was he defeated by his own enthusiasm?

Saturday, October 28, 2017

Justice A.P.Shah

Justice A.P.Shah delivered the Hindu LitFest lecture on October 28th. The theme was Literature and Law. After retirement as Chief Justice of the Delhi High Court, he led the Law Commission. His decision to decriminalise homosexuality and his consistent support for delegitimising capital punishment stand out prominently. Before his retirement from the Delhi HC, it was widely expected that he would be elevated to the Supreme Court. But it was not to be. Had this taken place post-2014, political parties would have blamed the central government and raised a furore.

Shah's judgements are known for their humaneness. He is against 'trial by the media'. At the same time, he stoutly defends freedom of expression.

He did not confine himself to the topic though he did speak elaborately on the linkage between literature and law. His references to American jurisprudence, English literature, Marathi novels, Tiruvalluvar, Silappathikaram and Rabindranath Tagore were as relevant as they could be. He praised Justice V.R.Krishna Iyer's erudite judgements and at the same time complimented the straight-forward simplicity of judgments of Vivian Bose.

Straying from the subject, he aired his grievance about the Jana Gana Mana judgment. He clarified he respects the national anthem but when standing up is legally mandated, he gets upset. This is a trifle unclear for can someone say, "I don't want to harm others. But if law becomes obtrusive and enjoins me not to harm others, I feel bad"?

There ought to be limits to judicial humaneness also. Criminality is addictive and if judges, by wearing humaneness on their sleeves, are liberal with the guilty, are they not letting down the innocent and the society at large? Mahatma Gandhi might have been a good barrister, but he could not have been a good judge. 

Thursday, October 26, 2017

Travesty of Governance in Infosys

So, Nandan Nilekani has concluded that there was nothing wrong in the acquisition of Panaya. Though he did not say in so many words, this meant that Narayana Murthy's theatrics was much ado about nothing. But Nilekani is a diplomat. He has proved his ability to work with effortless ease in both private and public sectors. He knows the importance of humouring Murthy if he has to succeed in Infosys.

Accordingly he has once again acknowledged the leadership role Murthy has played in building Infosys and in corporate governance matters. He looks forward to building a trusting relationship with Murthy.

Narayana Murthy expectedly has expressed his disappointment that Nilekani has given a clean chit to the previous Chairman, Seshasayee and the Board that he led. Et tu, Nilekani ?

Nilekani has offered a face-saver to Murthy by stripping Roopa Kudva of leadership of the Audit Committee. She is replaced by D.Sundaram who continues to retain Murthy's trust (friendship?). The company has unceremoniously deprived her of this position without assigning any reason. If she is now found to be unfit to lead the Audit Committee, she may not be fit to be a director either. She could have resigned from the Board.

Seshasayee has responded with grace. He has expressed the confidence that the company can now focus on business without any distraction. He has proved to be mature enough not to wax proud that Murthy's co-founder could not fault him in the Panaya deal.

It is regrettable that Murthy refuses to bring this sordid drama to a close. His lament that we may never know the truth exposes his distrust in the Board now inclusive of his relative Shri Prahlad and his co-founder Shri Nilekani. Persons like Narayana Murthy have to ask themselves the question, "Are we the only honest persons in the world?"

Mohandas Pai is continuing what he thinks is his role. He keeps provoking Murthy. Hopefully, Murthy will be less obstinate and irascible in future. Founders of the company had earlier expressed their desire to participate in the equity buy-back programme. Murthy will certainly do the company a favour if he also offers his shares to the company. Nilekani can then diplomatically express the company's decision to buy back Murthy's shares (as much as permitted) 'with regret'.

Wednesday, October 18, 2017

'Burnout culture' and sexism

Arianna Huffington, the well-known co-founder of the Huffington Post has courageously articulated an open secret. She has blamed the inappropriately high importance attached to performance excellence as the cause of sexism we find in many organisations.

A member of the Board of Uber, the company recently buffetted by allegations of sexism in the work place, she has undertaken to end the 'cult of the top performer' at Uber. She says that Harvey Weinstein could carry on his sexual misdemeanour uninterruptedly for a long time at Hollywood because of the 'cult of someone who delivers results' that is prevalent also in the Silicon Valley.  She advocates a pause in the practice of worship at the altar of hyper-growth.

She pleads for the need to find bonding activities other than boozing. Very strong statements, indeed. An assault on hedonism that is the hallmark of contemporary companies?

Why Indians disfavour democracy?

India is the largest democracy in the world in terms of population. Elections to representative Houses are held periodically and the collective will of the people is reflected in the constitution of parliament and assemblies.

It is therefore surprising that Pew Research has found an underlying support for autocracy in the country. According to recent surveys, 55% would prefer an autocratic leader. 27% strongly support this preference. Even more surprisingly, 53 % would not mind military rule.

These findings expose popular disgust with the quality and integrity of elected representatives. There are exceptions though. 85% retain trust in central leadership. Apparently, Modi continues to sustain an ethical image that contrasts sharply from the image of an average politician.

Monday, October 09, 2017

Crony capitalism again?

It used to be cynically said that parents are the enemies of children ("makkalukku chathru matha, pita"). It is more appropriate now to say that children are the enemies of parents. Indira Gandhi had Sanjay Gandhi, Morarji Desai had Kantilal Desai, Chidambaram has Karti Chidambaram and Jayalalithaa had Sudhakaran, an adopted son. Is Amit Shah's son, Jay Amitbhai Shah one such? (I should not go overboard on this theme; many politicians do not need their children to bring disrepute to them. They do it themselves.)

The Wire reports that a company and a few partnership firms owned by Jay Shah have recorded some transactions which are worth probing. These transactions include humongous increase in revenues in 2015-16, loan from IREDA, a public sector unit concerned with renewable energy, to a firm which was till then a stock-broking firm , a loan from a co-operative bank (any loan from a co-operative bank to any politician's associates prima-facie attracts adverse attention) and a loan from an NBFC  not reflected in the latter's Balance Sheet.

Would Amit Shah and Jay Shah come clean on this? Otherwise the needle of suspicion cannot be deflected.

Saturday, October 07, 2017

Economics Nobel

Clarivate Analytics has announced a list of six probables for Nobel prize in Economics 2017. CA has become a household name in India because it has included Raghuram Rajan in the list.

The list contains Colin F.Camerer, George F.Louwenstein, Rober E.Hall, Michael C.Jensen and Stewart C.Myers in addition to RR. The first two are neuro / behavioural economists, the third one has researched unemployment, recessions and worker productivity. The other three are known for their brilliant work in corporate finance. In addition, Raghuram Rajan retrospectively mesmerised the world by having predicted the 2007- global economic meltdown / tailspin.

In case RR wins the Nobel which he richly deserves, the opposition in India will be gifted with a massive ammunition which it does not deserve to lambast the government for having spurned RR away from RBI.

Thursday, October 05, 2017

Humour, unlimited

I saw the following news items in The Hindu today on the same page and could not control my laughter:

Mr.Modisaid, "Nov 8, 2016 will be known in history as the first day in the war against corruption and black money."

Mr.RahulGandhi said,"Farmers and youth are the two main issues concerning India and if Modiji cannot address these, he should say so and the Congress will come and do it in six months."

Modiji, are you beginning the battle only now? Were you waiting for an auspicious time?

Rahulji, What did the Congress do when it was in power?

Do these leaders believe their own statements? Do they think all Indians are fools?

Wednesday, October 04, 2017

Nobel prize

We are now halfway in announcement of Nobel prize winners. Winners of prize in Medicine, Physics and Chemistry are now known. Only Literature, Peace and Economics are left.

There are 3 joint winners in each of the subjects so far. Seven out of nine are Americans. All are male. Lawrence Summers of the Harvard University was hauled over the coals for stating that female brain is not as attuned to science as the male brain. Is preponderance of males among Nobel laureates in medicine, physics and chemistry year after year proving him right? Are unpalatable truths banished from public debate?

It is likely that male domination among winners of Nobel prize in remaining three subjects this year may not be 100%  It is worth watching.

Monday, October 02, 2017

Roadside corruption

While taking a walk, I witnessed a traffic constable stopping a car, speaking to the driver briefly and accepting some cash. Evidently, it was the usual bribe we keep seeing on the streets day in and day out.

What made this scene memorable was that my fellow-walker recognised the cop who also spontaneously reciprocated. I learnt that the same policeman had stopped my fellow-walker's car a week earlier and had demanded money which was refused.

When confronted, the cop justified his behaviour: "What else can I do? My normal salary is Rs.30,000 p.m. But it has been cut to Rs.10,000 thanks to scores of complaints against me. I have a family to maintain. Please help me if you can. But do not harm me by making a complaint."

So, by pruning the cop's salary, has the government made him more corrupt?

Sunday, October 01, 2017

Bullet trains in India

Government has decided to have a bullet train between Mumbai and Amdavad with technology and credit from Japan. It is possible to raise many inappropriate questions like a) do we need bullet trains?, b)are we not foreclosing investment on more important projects because of this decision?, c)will there be enough traffic to make the project viable?, etc.

These questions are beside the point because a)attempts to save time are always welcome; there are limits to speed in our existing non-bullet system, b)"either - or" analysis is justified only if funds are a constraint and c)supply creates its own demand (Say's Law) and therefore generation of adequate traffic to ensure viability need not be a constraint.

The project is sought to be justified by some people on the ground that Japanese credit is so cheap that interest burden is almost nil and therefore we are paying only for technology. This is a fallacious argument because such cheap credit ought to be used for many other projects which is not done now. Have the Japanese arm-twisted India by extending only a two-in-one offer namely bundling technology and credit
(take both or neither)? It does not appear to be so. We must go in for more credit from Japan but not necessarily for the bullet train project. Since the domestic demand for credit is rather tepid in Japan, and India's credit-worthiness is creditable despite the hesitation of international credit-rating institutions, Japan would be happy to lend to India and get a higher rate of interest than paid by Japanese entities.

Saturday, September 30, 2017

Tampering with judiciary

NDA is following Indira Gandhi's policy of inconveniencing the judges who dare to pronounce judgments against the powers that be. The latest victim of this obscurantist policy is Justice Jayant M.Patel.

Justice Patel who in the normal course would have become Acting Chief Justice of Karnataka High Court in October was transferred to Allahabad High Court. He put in his papers.

This is an unsavoury incident that projects the government in bad light. The Supreme Court collegium seems to have fallen in line. A spineless judiciary guarantees unjust government.

Friday, September 29, 2017

Two Finance Ministers and their sons

Yashwant Sinha, a former bureaucrat and Finance Minister, has pilloried government's economic policies and their implementation. His son, Jayant Sinha, a minister in the central government, has responded to his father's criticism gracefully. Economics is always a slippery subject. The same economic policy may work sometimes and may prove disastrous in less fortunate times. But the dialogue between Yashwant Sinha and his son has been delightful sans any bitterness. They belong to the same political party but are able to bring in different perspectives.

Contrast all this from what another former Finance Minister and his son are doing. P.Chidambaram and Karti Chidambaram are spending their time trying to prove why their alleged ill-gotten wealth is not illegitimate after all. No smoke without fire?

Sunday, September 24, 2017

Chidambaram, victim or guilty?

It is widely made known that Karti Chidambaram has amassed assets in many countries misusing his father's ministership. This is vehemently denied by both father and son. They have gone to the extent of expressing their readiness to gift their undisclosed assets if any to the government.

CBI  therefore needs to expedite its trials and favour the public with a conclusion to this political histrionics. The corrupt need to be exposed and legally punished. It is equally important that the innocent are not harassed. The public should not be harassed by keeping the pot boiling indefinitely.

BJP is steadily losing its popularity as it is unable to fulfill its plentiful promises. Unemployment problems are intensifying. The opposition despite its lack of unity must be relishing the opportunity arising from BJP's incapacity to be equal to the promises it has made.

Tuesday, September 19, 2017

Rahul Gandhi in USA

According to reports appearing in newspapers like The Hindu and The Hindustan Times, Rahul Gandhi is making a favourable impression on his audience in USA. There are atleast three reasons for this lucky break for Rahul Gandhi.

He is intensely tutored by Milind Deora and Shashi Tharoor from minute to minute. Rahul Gandhi is repeating what Americans want to hear about India. "India is intolerant." And third, expectations from Rahul Gandhi were pretty low. Compared to expectations, the performance has been better so far.

Is Rahul Gandhi turning over a new leaf?

Wednesday, September 13, 2017

Rahul Gandhi on dynasty

Rahul Gandhi was addressing students of the University of California - Berkeley. Times of India reported as under:

"Responding to a question from students, Gandhi said that he was “absolutely ready“ to take up an executive responsibility if the party asked him to do so. Responding to another question whether the Congress party was more associated with dynastic politics, Gandhi argued that India is being run by dynasties.




“Most parties in India have that problem So...Mr Akhilesh Yadav is a dynast. Mr Stalin (son of M Karunanidhi in DMK) is a dynast...Even Abhishek Bachchan is a dynast.So that's how India runs. So don't get after me because that's how they India is run. By the way , last, I recall, Mr Ambanis are running the business.That's also going on in Infosys. So that's what happens in India.“ "

Infosys is run by dynasts? Narayana Murthy and other founders of Infosys must be dumbfounded by this remark of Rahul Gandhi. A dynast gets hereditary powers. Assuming that Infosys is run by its founders (which is contested by the founders), how can Rahul Gandhi refer to them as dynasts? Is he clairvoyant enough to predict that children of Murthy and others will manage the company? Even otherwise, there is a difference between business dynasty and political dynasty. Business dynasts are owners of the business. Is Rahul Gandhi owning the Congress party?

Friday, September 01, 2017

Murthy's relative in Infosys' Board

Seshasayee has now responded to Murthy's uncomplementary reference to him. Murthy will react to this. The war of words will continue.

In October, 2016 D.N.Prahlad was nominated to the Board of Infosys. He had earlier resigned as an employee of Infosys. He is a relative of Narayana Murthy. There is nothing wrong in this arrangement. When questioned on this, Murthy refused to answer. The 'Father of Corporate Governance in India' could have been transparent about the purpose of nominating a relative as a director.

At that time, there were apprehensions about the role of Prahlad. As the Mint reported,


“The worrying thing of this appointment of an executive perceived to be close to the founder is what message it sends to the senior leaders at the company,” said the Infosys executive. “If the board agrees to have a representative of the founder, then leaders clearly are told who is more important. So, can the CEO really have his team rally around him?”
Surprisingly, Seshasayee went out of the way to defend Murthy:
"To be sure, Infosys has categorically denied the existence of twin power centres at the company. “First, there is no such twin power centres. That is completely wrong, and that will be very unfair to the promoters,” R. Seshasayee, non-executive chairman of Infosys, said in an interview last month. “Because, like I mentioned, Murthy has been an exceptional leader who has chosen to stay away and only give advice when sought from. So it will be utterly wrong (to claim otherwise).” The newspaper added, "Murthy did not respond to queries on the appointment."
Seshasayee must now be ruing why he showered an unmerited compliment on Murthy.
It is interesting to note that Nandan Nilekani was all praise for Prahlad in his first press conference on becoming chairman of the company. He knows how to keep Murthy in good humour.

Tuesday, August 29, 2017

The Economist on Murthy

The Economist compares Murthy and Bill Gates and exclaims:

"THE chairman of Microsoft, John Thompson, occasionally reminds one of its directors, a fellow by the name of Bill Gates, that his vote in board meetings is no more or less important than that of other members. Contrast that with Infosys, an Indian technology firm, whose own retired founder succeeded in getting its boss to quit on August 18th, after a months-long whispering campaign .The board was dismayed, but the outcome was all too predictable, given India’s penchant for treating corporate founders as latter-day maharajahs."

The magazine wisely adds, "Founding shareholders can be a resource for a company, but only if they know their place—in the boardroom, perhaps, but not on a pedestal."

The Economist also points out, "Mr Murthy has not received much in the way of gratitude for driving out Mr Sikka. Corporate-governance experts decried his method—notably a whispering campaign that suggested, but fell well short of proving, that Mr Sikka had profited from an acquisition Infosys made under his watch. Mr Murthy’s right to complain is also shaky. Though he is admired as a godfather of the tech scene, having pioneered the outsourcing model that has since become a major industry in India, he is a tiny shareholder in Infosys, owning just 0.38% of the company (his relatives own another 3% or so)."

Saturday, August 26, 2017

Nandan Nilekani's second innings

It is not politically correct to question the wisdom of Nandan Nilekani re-visiting Infosys. But one is taken aback by his hubristic remark that "there is nobody else. So, I had to come in. " Considering oneself as indispensable does not speak well of a leader. "I have a record of doing things successfully" is another boast (though this may not be far from truth)  he could have done without. Sometimes it is worth remembering that if one has not had failures, it means one has not tried enough things.

All this is not to belittle Nilekani's achievements. When deeds speak for themselves why should one belittle oneself through vainglorious utterances? Roll-out of Aadhaar is certainly a feather in his cap. Whether a sound move or not, Nilekani deserves appreciation for accepting the gauntlet with the hope of 'reviving' the governance culture of Infosys.

Having re-entered Infosys, Nilekani faulted in addressing the media without readiness to share relevant information. When asked if he would place in the public domain the investigation report on Panaya deal, he fidgeted saying that he would get briefed, study the reports with a calm mind and then decide whether or not to release the report. Release of this report was one of the major demands of Murthy. Has Nilekani spoken to Murthy on this?

Nilekani repeatedly asserted that he is the chairman of the company and therefore entitled to take appropriate decisions. Was it fair to deny the same privilege to Seshasayee? He told the media, "Give me the freedom to run the company and get it back to the path of progress." Is Murthy listening? Perhaps Murthy may not be so offensive to a fellow-promoter.

Nilekani seems to have understood the real problem facing Infosys. He kept saying how much he respects Murthy who gave him his first job at Patni's in Pune and who is "the father of corporate governance in India". Infosys' chairman needs to keep massaging Murthy's ego if he has to survive. But Nilekani has to decide: Who is more important, Infosys or Murthy?

Nilekani has clarified he would remain in Infosys till stability is established. In these VUCA days, stability is unknown. Nilekani may have to remain in the company for ever!

Friday, August 25, 2017

Corporate misgovernance

A new type of risk has been identified. It is called 'Murthy Risk'. It refers to the danger of a creator becoming the destroyer of what was created by oneself. This risk arises from the creator's possessiveness and gets aggravated by a 'holier than thou' attitude.


The recent contretemps at Infosys has been pragmatically solved by Nandan Nilekani's re-entry into the company. The chairman, R.Seshasayee has been shown the door though he has politely welcomed the development himself. He has exhibited his grace which is in marked contrast to Murthy's grouchiness.


Why did Murthy behave the way he did towards Seshasayee? Before hazarding my unfounded and probably prejudiced guess, let a few things be said about Seshasayee. The Hindu once reported,

"His (Seshasayee's) reaction to his upcoming move at Leyland from managing director to executive vice-chairman (from April) is similarly clear-headed. “It's necessary for the sake of the organisation to have a succession,” he says. “The next generation is coming up and we must make space for them.”It's all part of the larger evolution of his life, as he puts it: “You have to constantly ask yourself — where do I find joy next?”"

Seshasayee has a mature relationship with any position he occupies. While doing justice to the job on hand, he does not expect the relationship to last long. It is reported that when promoters opposed some moves made by Infosys while he was the Chairman, he offered to resign, but the Board asked him to continue. The promoters (mainly Murthy) have taken a different position from the Board now and made him exit.

There is an old news-report which says,"At the Infosys conference this Monday , board chairman R Seshasayee praised Punita, saying a woman should not be judged by the profession of her husband." 

Punita Sinha is a Wharton-educated distinguished professional who happens to be the spouse of Jayant Sinha, a minister in Modi's cabinet. Murthy criticised the appointment of Punita Sinha as a director in Infosys Board on the ground that it was political. Murthy's contention was misogynistic and smacked of opportunism to place Seshasayee on the mat. When Murthy was the chairman, Larry Pressler was a director on the Board. (Pressler is an American politician.) Was that okay?

Nilekani has said, "This company will be a Board-managed company." He could have added, "This Board will be a promoters-managed or more precisely Murthy-managed Board."

Seshasayee is a family-friend of Venu Srinivasan and Mallika Srinivasan. Murthy's son was earlier married to Srinivasans' daughter. Sometimes family happenings blinker one's professional vision.

Directors are elected by shareholders who alone have the right to sack them. Subjecting the directors' tenure to the whims and fancies of the promoter-clique operating from outside the Board is patently corporate misgovernance. He who 'walked away voluntarily' is not supposed to evict a Board-supported chairman and the directors who do not toe his line. Corporate democracy requires freedom from promoters' dictatorship.

A transient problem in a company has been resolved. But in the process, a timeless precedent of corporate misgovernance has been set.

Wednesday, August 23, 2017

System follows people

If people can misbehave, so can the system. The ugly confrontation between Murthy and the Infosys Board is closely followed by new bugs in the Finacle core banking solution. Finacle is a product of Infosys.

Bank of Baroda has notified its customers that it is migrating to an improved version of Finacle. Consequently, many deposit accounts have been unauthorisedly debited with various amounts. According to the bank's MD and CEO, the debits are being reversed on a war-footing.

It is a strange coincidence that Ravi Venkatesan, the co-chairman of Infosys is also the chairman of Bank of Baroda.

Tuesday, August 22, 2017

Narayana Murthy fails the 'FAT' test

Narayana Murthy, the anguished co-founder of Infosys, was never tired of saying that Fairness, Accountability and Transparency were foundations of corporate governance. Nobody can take exception to this motherhood statement. It is only fair that Murthy also is tested on this.

These three qualities are required not only of the company and its management, but also of its founders. Murthy has been less than fair in constantly sniping at the Board of Directors. He rightly expressed his concern over excessively liberal payments made or sought to be made to an ex-CFO and an ex-legal counsel. He went overboard in making this the litmus test of corporate governance. The Board and the Chairman were certainly on a weak wicket on this issue. Murthy exhibited his petulance by throwing a public tantrum over this. His call to the Chairman was : "Admit your guilt and quit." He prejudged the issue, converted a possible mistake into guilt, pronounced judgement and wanted his pound of flesh. He was atrociously belligerent.

Murthy was always diffident about inorganic growth. It is therefore not surprising that he cried wolf when Panaya was acquired. $200 Million may be small change for Infosys and Sikka, but it was a princely sum for frugal Murthy. Murthy started casting aspersions on Sikka by referring to association of a SAP executive with Panaya. The acquisition value was decided on the basis of due diligence by respected agencies. When Murthy cried foul, the Board appointed external investigators who found nothing amiss in the Panaya deal. Murthy was not convinced. He did not mind becoming a rebel without a cause.

As a co-founder of the company, Murthy is accountable to fellow-shareholders. Non-stop washing in public of dirty and not-so-dirty linen amounts to abdication of his responsibility towards other stakeholders in the company.

His transparency has been questioned by the Board which in a damning statement has claimed that Murthy desired his demands on appointment of directors be met without attributing the changes to him. This is stealthy secrecy and not trust-worthy transparency.

Murthy is reducing himself to a sanctimonious humbug. No wonder Omkar Goswami felt it necessary to address an open letter to him:

http://economictimes.indiatimes.com/tech/ites/when-you-gotta-go-you-gotta-go-former-infosys-board-member-tells-murthy-in-open-letter/articleshow/60169401.cms

Saturday, August 19, 2017

Narayana Murthy's allegations

There is no doubt that Mr.Narayana Murthy has made serious allegations against the Board of Infosys. He has alleged that the company's governance standards have plummeted since he, his co-founders and early adopters like Mohandas Pai and Balakrishnan left the company voluntarily in 2014.

Murthy has demanded quite a few responses from the Board. Some interesting aspects are covered here. While reading these demands, doubts may arise in our minds. These are also pointed out.

"The most worrisome aspect of the whistle-blower accusation is his or her claim that there was an e-mail sent by Mr. David Kennedy to Dr. Vishal Sikka that Mr. Kennedy could not hide the Bansal agreement from the board and the CFO any longer. It is best that the company scotches this accusation either by denying the existence of such an e-mail with proof and clearing the names of both Mr. Kennedy and Dr. Sikka, or by explaining to the shareholders what action was taken against the individuals who hid information from the board and from the new CFO who signs the SOX statement. "
Doubt: In case such an e-mail does not exist, how does the company prove its non-existence? Presence is provable. Is absence also provable?

"The general belief among a large number of shareholders is that the current attitude of the board is a clear example of the worst board governance in India’s corporate history."
Doubt: Since Murthy believes in data and data alone, does he have enough evidence say by way of a survey to prove his contention?

"Several investors have expressed concern about the lack of transparency in the press release on the Gibson Dunn Crutcher (GDC) Report. The general impression in the market is that the Infosys board has spent lots of shareholder money in hiring expensive lawyers and obtained a clean chit for themselves from these lawyers. It is very important to remember that none of these expenses would have been incurred if the board and the company management had not committed serious mistakes regarding Rajiv Bansal agreement and David Kennedy agreement."
Doubt: Murthy raised doubts about these agreements with ex-CFO etc. necessitating further investigation. Is it proper for Murthy to blame the Board for ordering these investigations? Murthy has also clarified that he had advised Seshasayee to obtain investigation reports from impartial agencies (he had named a few including some former independent directors). Is it proper for Murthy to complain about the cost now? Of course, the Board did not go by Murthy's recommendation regarding agencies named by him.
"It would be proper for the board to put all the three investigation reports (Cyril Amarchand Mangaldas (CAM) Report, Latham and Watkins (LW) Report and Gibson, Dunn and Crutcher (GDC) Report) and the Panaya valuation report on the website of the company, and also provide a point-by-point denial of the whistle-blower accusations fully supported by data and facts. The whistle-blower has made serious allegations and just a top-level press release is not sufficient. The company should provide answers to the following questions emanating from the whistle-blower accusations. This should not be difficult since the board claims that three separate well-known law firms have investigated the issues thoroughly and since the board has spent huge amount of money on investigations."
Doubt: Murthy is unclear whether he says that the whistle-blower's accusations are fully supported by data and facts or he wants the Board to clarify with data and facts. Sowing seeds of suspicion by skillful positioning of words is an art.

"a. Can the company categorically deny that any employee and / or his / her relative (spouse, father, mother, brothers, sisters, nephews and nieces, children, spouse’s father, mother, sisters, brothers, nephews and nieces) benefitted personally in the Panaya acquisition?"
Doubt: Is it expected of any company to take a declaration from every employee that there is no personal benefit to him / her and relatives in an acquisition? Murthy would be justified in restricting his enquiry to directors and top management.

"c. If the answer to question 2a is YES, then can the company provide the names of Panaya investors related to Infosys employees with the nature of their relationship to the Infosys employee (spouse, father, mother, brothers, sisters, nephews and nieces, children, spouse’s father, mother, sisters, brothers, nephews and nieces) and the number of shares they held on the date that Panaya was acquired by Infosys?"
Doubt: Does Murthy mean 'if the answer is NO'?
"Has the culture of the company changed (since the founders left) to reward people who hide information from the board?"
Doubt: Good sarcasm.
One person has responded to Murthy's efforts to pin down the Board as follows:
Richard Armond: "Infy under Mr Murthy was a better managed company and grew much faster than under Sikka. Today Infy can barely keep up with the growth of its peer IT companies in India. There have been murders on campus and a rape. Yet, today deluded Infy employees are more rattled by Sikka's exit."
Doubt: Would Murthy's next missile deal with murders and rape in Infosys?

The Infosys imbroglio

The Infosys drama continues to play out with striking similarities to what tanspired in the Tata group when Cyrus Mistry was ejected out.

Vishal Sikka claims that persistent attempts by N.R.Narayana Murthy to malign the company's Board and top management derailed any move by the company to improve its performance. Murthy counters saying he is focusing on governance and not performance.

Sikka came from SAP, a renowned German company. Financial performance counts for every company and it is so for German companies also. Remember the Volkswagen scam involving tampering with fuel gauge ? Coming from such a background, Sikka puts performance over everything else including corporate governance.

Governance has both legal and ethical dimensions. Most CEOs prioritise the legal aspect over the ethical requirements. Laws are strictly defined. Ethics are not so. That is why people are more confused than enlightened when Ratan Tata boasts about the Tata Culture and Murthy obsesses with his version of Corporate Governance. Significance of ethics in management should not be trivialised. At the same time, we need to bear in mind that there are acceptable ranges in ethical behaviour. Anyone who has a smattering of Mahabharata would appreciate this.

Murthy carries a burdensome baggage. He feels adrift since leaving the company. That is why he made a comeback. Though for all outward appearances he welcomed professionalisation of management with the exit of promoters from management, he did not have a proper understanding of his self. He continues to be possessive about the company he and his co-promoters formed. His intellect which is not very sharp hesitantly accepts the need for professionalisation. But his heart continues to crave for active association with Infosys. He continues to suffer from Founders' Curse.

This dichotomy between what is good for one's creation and what is psychologically comfortable for oneself is not uncommon. The dissonance arising from this has to be resolved in a mature manner. If it is not resolved in time, it leads to street brawls like what we are witnessing in Infosys today.

Issues raised by Murthy are of course not trivial though they could have been sorted out in a less amateurish way. Persons like Seshasayee, Ravi Venkatesan ,  D.Sundaram  and Roopa Kudva are not men of straw and cannot be trifled with. So, Murthy's non-stop allegations against the Board (though he tries to sound a little more pleasant by seeming to accept their proven credentials) are in poor taste and are an inescapable consequence of his own split personality where brain and heart are at war.

Other promoters like Shibulal, Nilekani, Dinesh and Gopalakrishnan have maintained a dignified silence. This is at variance from the cacophonic support extended to Murthy by the former CFOs who were appointed by Murthy. Mohandas Pai has not covered himself with glory by egging on Murthy.

Murthy has been petulant. The Board has been flat-footed and out-manoeuvred by both Murthy and Sikka. Shareholders have learnt a painful lesson that neither promoters nor the management care for the company. If either Murthy or the Board does not exhibit flexibility in dealing with the other, a company that was showcased as an exemplar combining governance and performance would fall between two stools. Both Murthy and the Board owe it to the company and its shareholders to mend their ways.

Thursday, August 10, 2017

Makings of a banana republic

A banana republic is defined as
  1. "a small state that is politically unstable as a result of the domination of its economy by a single export controlled by foreign capital."

In contemporary parlance, any state where the rule of law does not prevail is named a banana republic.

If a state is not to become a banana republic, various institutions need to perform their role responsibly. In particular, the judiciary, the police, the election authority and the so-called nominal heads like the President and the Governor have to be true to their calling.

In this regard, India is in a perilous state for a long time. Judicial delays and motivated judgments are legion. The police dances to the dictates of political masters. The election commission seems to be on surer footing. President, Vice-President and Governors are at the beck and call of the party in power. Some of them become conscious of their duties only after demitting office.