Thursday, December 27, 2018

Bancroft's dilemma


"In March 2018, the Australian cricket team was involved in a ball-tampering scandal during the third Test match against South Africa in Cape Town when Cameron Bancroft was caught by television cameras trying to rough up one side of the ball to make it swing in flight. Captain Steve Smith and vice-captain David Warner were found to be involved and all three received unprecedented sanctions from Cricket Australia."

Bancroft used sandpaper to rough up the ball. He was banned from international and domestic cricket for nine months.

Bancroft has now admitted that he acted on the suggestion of David Warner and that he made 'a massive mistake' in implementing the suggestion. Sequence of events up to this is understandable. Aussies are reportedly not known for their cricketing ethics and they go for the kill in every match. They seem to claim "all is fair in cricket." But what unfolds after this intrigues any logical mind.

Bancroft accepts that he had a choice. He could have ignored Warner's plea and avoided the public infamy that caught up with Australian cricket. He regrets complying with Warner's suggestion. Therefore, it is reasonable to believe that he would have been happier if he had not tampered with the ball.

But alas, no !  Bancroft says he would have felt bad for letting his team down ! He has painted this as a catch-22 situation of damned if you do and damned if you don't.

How do we explain Bancroft's dilemma? Though he admits that he was not a 'victim' of Warner's plan in the sense that he could have decided not to comply with the latter's suggestion, if the plan proposed to him was actually a Morton's fork as he claims, then he was really a victim of Warner's game plan. If Warner had not made this proposition, Bancroft would not have been in this pickle.

Why did Bancroft take the huge risk of getting caught indulging in an unethical act? If he had underestimated the risk of exposure, he is downright stupid. If he had thought that the act was not unfair given the circumstances of defeat glaring at the Australian team, he must have philosophised that "end justified the means".

Does one's opinion on one's choice depend on whether the (im)morality of the choice is found out by others or not? In case the TVs had not captured Bancroft's disgraceful act, would he have felt any pang at all or would he have been disconsolate nonetheless? Is every dirty trick OK as long as it is not found out?

Does an unethical act become less so if it is done for the sake of one's team and not for personal benefit?

Thursday, December 20, 2018

Why Kamal Haasan cannot succeed in politics

Success in one field does not guarantee success in other fields. Expertise in one vocation cannot automatically become expertise in another. Despite this truism, many successful actors in Tamil Nadu drift into politics optimistically.

Kamal Haasan has done the same thing. Does he have what it takes to excel in politics? I was listening to his debate with Smriti Irani in a television channel yesterday and got convinced that the probability of his success in his new avatar as a politician is almost zero.

Binary rules do not operate in the political jungle. Successful politicians do not give a definitive yes or no answer to any question. They are required to provide convoluted and long answers even to simple questions. This unfailingly provides an opportunity to wriggle out of any unforeseen contretemps. Yes or no answer does not enable one to come up with statements like 'this is not what I meant' or 'the media misreported what I said' if and when subsequent circumstances demand backtracking. Such circumstances are very common in politics.

In a way, Kamal Haasan was unlucky to be pitted against Smriti Irani who is a seasoned politician with a masterful play on words. She is capable of saying something and immediately thereafter proving that she never said such a thing. In contrast, Kamal Haasan came out as a babe in the political woods.

The actor has another problem. Oral articulation helps in politics. Somehow he is very economical with words in political conversations and is unable to put across his ideas convincingly and with clarity. Perhaps clarity of expression is constrained by inadequate clarity of thought.

Tuesday, December 11, 2018

RBI Governor

Appointment of Shaktikanta Das, a retired IAS official, has predictably attracted a lot of criticism. There are three main layers of criticism. One is that he is not a hardcore economist. Second, he was supportive of demonetisation which 'failed to deliver intended results'. Last, his integrity is suspect.

He is the 25th Governor. Among these 25, only six have been 'economists'. RBI was established in 1935. The first economist to become a Governor was B.N.Adarkar. He was a stopgap pending appointment of a new Governor. He was earlier a Deputy Governor. He remained as Governor only for 42 days till he was replaced by S.Jagannathan, a career civil servant. This happened in 1970. (The Governor with the shortest tenure was Amitav Ghosh for 20 days in 1985 pending assumption of office by R.N.Malhotra., a bureaucrat. Ghosh was a commercial banker and then a Deputy Governor of RBI.)

There have so far been only six economists donning the mantle of RBI Governorship, namely Adarkar, I.G.Patel, Manmohan Singh, C.Rangarajan, Raghuram Rajan and Urjit Patel. There is no study to indicate that economist-Governors performed better than others.

P.Chidambaram has argued that Das was an advocate of demonetisation and that his appointment comes so soon after the appointment of another proponent of demonetisation, Krishnamurthy Subramanian, as the Chief Economic Adviser to GOI. Chidambaram argues that this means the government appoints only those who are favourably disposed towards government decisions. Politically this is what all governments do. Which government would want an ideologically inconvenient person in a key position? Chidambaram's alleged role in appointment of chairmen of various banks makes one wonder if this is not a case of the pot calling the kettle black.

The third criticism is voiced by Subramanian Swamy. He doubts Das's integrity in the light of his alleged complicity in and connivance at Chidambaram's various alleged misdemeanours.

These are controversial times. Therefore, each and every proposal is likely to be viewed as a colourable exercise.


Monday, December 10, 2018

Saving Economics from Politics

An editorial appeared in The Hindu on November 30th which is reproduced here.

                                                                   Number Theory

"The larger lessons from the GDP back series must not be clouded by a political slugfest"


"Backcasting, or reworking past national accounts statistics based on the latest base year, is a regular exercise that governments carry out. Mainly done to enable precise comparison and analysis, it is a difficult exercise prone to contestation as it involves the inclusion of newer data sources, exclusion of outdated ones and making some subjective assumptions in the process. Throw in the political element, and GDP backcasting can become a controversial exercise, as it has now become in the case of the release of back series data from 2005-06 to 2011-12, the new base year. The data computed by the Central Statistics Office (CSO) and released by the Niti Aayog show that India never really grew in double-digits in 2010-11, nor was it the high-growth economy in the five years preceding this as earlier thought to be. It so happens that this period covers the two terms of the Congress-led United Progressive Alliance government, and the new data have predictably set off a political storm. The Congress may feel aggrieved as its biggest achievement, of taking India on the high GDP growth path, has come under question. During earlier instances of backcasting of GDP data, the political environment was not as deeply polarised as it is now, and so the exercise remained more academic.
The danger in the political slugfest now is that the many valuable insights that can be gleaned from the data will be lost sight of. The biggest of these is that India never really decoupled from the global economy during the years of the financial crisis (2008-10), unlike what was earlier believed. The new back series data show a much lower growth rate. This is an important learning for policymakers, going forward. Any criticism of the data has to take into account the fact that it has been generated by a thoroughly professional organisation, the CSO, and the methods have been scrutinised by experts, including past chief statisticians, and the Advisory Committee on National Accounts Statistics. Certainly, the release of the back series by the Niti Aayog goes against convention and is bad in optics. But this should not be reason to contest its integrity. The method of computation reflects the latest United Nations System of National Accounts; it also captures changes in the economy since 2004-05. Data sources have also been updated. Experts had testified to the robustness of the method when it was introduced in 2015, even while underlining that the availability of reliable data was crucial to arrive at the correct overall picture. There is little doubt that India needs to invest more in data collection and integration and do informal sector surveys more frequently. Robust, updated data are, in fact, insurance against politicians hijacking what is essentially an economic exercise."

    Comment on this editorial by the Readers' Editor of The Hindu on December 3rd is reproduced below:

"There were problems with the fundamental assumptions of a recent editorial on the new GDP back series

I generally refrain from commenting on editorials and opinion pieces. I recognise that there are points of convergence as much as there are points of divergence between the newspaper and its myriad readers, and even within the newspaper itself. These conversations lend plurality to the newspaper and they should not be viewed from any narrow ideological prism. However, I have to break from this norm to discuss the editorial “Number theory” (Nov. 30), which generated some sharp and divergent reactions.

Independence of the editorial

The arguments against the editorial were varied. Some took an ideological standpoint, while others interpreted the events that led to the release of the GDP back series. I would like to reiterate that my role as the Readers’ Editor is not that of a pre-publication censor, but of a post-publication evaluator. I do get complaints about The Hindu’s editorial policy, which is defined by the editor and his editorial team. I can explain the policy but I cannot interfere with it. It is vital to support the independence of the editorial. The acid test for the Readers’ Editor is how he conducts himself when his own opinion is at variance with that of the paper. Can he be an effective advocate for free speech, tolerance and plurality if he lacks these democratic traits? Hence, the issue I am discussing is not about the ideological thrust of the editorial but its fundamental assumptions.
The assertion of the editorial that “robust, updated data are, in fact, insurance against politicians hijacking what is essentially an economic exercise” seems like a statement yearning for an ideal reality rather than one that is based on reality. The sequence of events since the creation of Niti Aayog seems to point at a complete politicisation of numbers. Some facts lend credence to the criticism of the numbers put out by Niti Aayog. One, the government had failed to appoint a Chief Statistician for nearly eight months after the retirement of T.C.A. Anant in January. Two, it has had a tense relationship with the Reserve Bank of India. Three, a set of data presented by the committee set up by the National Statistical Commission was withdrawn. Four, the Agriculture Ministry backtracked on a report showing the adverse effects of demonetisation on farmers. Five, there’s the timing of the new data, which many see as a desperate ploy to distract people’s attention from the trenchant criticism of demonetisation by the former Chief Economic Adviser. The line between the Central Statistics Office and Niti Aayog is blurred, thereby lending a political colour to an essential economic exercise.

The practice of data torture

If the editorial is read along with the explainer “What’s with the back series GDP data?” (December 1), it is clear that the editorial jumped the gun to grant the benefit of doubt to the latest exercise and suspended essential journalistic curiosity. The explainer deals with the problem of finding matching data for the older series to the present MCA-21, which is available only since 2011-2012. As a journalist, my entry points for understanding a range of subjects have been science and literature. About pure qualitative methods and number crunching, one of the finest historians of science, Thomas Kuhn, observed that “nature undoubtedly responds to the theoretical predispositions with which she is approached by the measuring scientist.” The Anglo-American economist, Ronald Coase, gave an interesting economic reading of this statement: “If you torture the data long enough, it will confess to anything.” It is true that governments and institutions do indulge in data torture, a practice of repeatedly interpreting source data until it reveals a desired result.
The editorial seems to be oblivious to this caution from the Nobel laureate. Its statement that “during earlier instances of backcasting of GDP data, the political environment was not as deeply polarised as it is now, and so the exercise remained more academic” fails to capture the full picture. In all the earlier changes, the methodology was not only robust but also transparent, and incomparable parameters were hardly used to deduct a number to understand macroeconomic reality. This was an editorial of forking paths, for how do we reconcile the assertion that “the release of the back series by the Niti Aayog goes against convention and is bad in optics” with the conclusion that “this should not be reason to contest the integrity of the new numbers”?
readerseditor@thehindu.co.in"

           My response to the comment of the Readers' Editor
Dear Sir,

I refer to your column in The Hindu today.

Though you are hesitant to comment on editorials, I think you have every right and perhaps even duty to make objective observations on anything that concerns readers. Readers do read, nay even study, the editorials in a newspaper like ours.

As a former banker, I have very often observed that a manager averse to lending ultimately selects a wrong borrower to lend.  In a similar way, though you are averse to comment on an editorial, you have finally chosen a wrong editorial to criticise.

You have noted the assertion that "robust, updated data are , in fact, insurance against politicians hijacking what is essentially an economic exercise" is a statement yearning for an ideal reality (sic) rather than one that is based on reality. In the process, you have ignored the presence among readers of those who look forward to The Hindu to play an effective role in shaping the tone and tenor of economic discussions. Freeing economic discussions from political prejudices is not only desirable but also essential to promote economic development. That The Hindu has done this in the editorial under reference despite the newspaper's proclivity to be harsh on the present powers-that-be is welcome. Please don't dissuade the editors from objective analyses.

The editorial has rightly drawn distinctions between who prepared the data and who communicated them to the wider populace. We should not stigmatise the data because the communicator (Niti Aayog) is allegedly political. The leader has correctly referred to the "fact that it has been generated by a thoroughly professional organisation , the CSO, and the methods have been scrutinised by experts ------". What else do you desire?

I salute The Hindu for its brave attempt to elevate economic discussion from the cesspool of dirty and partisan politics. I hope that the newspaper will continue this crusade despite the dominant presence of carping critics with a hidden political agenda.

Regards,
K.R.Srivarahan,

Urjit Patel

The resignation of Urjit Patel is not surprising though the timing certainly is unexpected. It has robbed the London court ruling on Mallya extradition of its due share of discussion and limelight. Our exhilaration over India's victory in the Adelaide cricket test has been subdued thanks to this untimely development.

Urjit Patel has politely attributed his resignation to personal reasons. But the former Governor, Raghuram Rajan, has not been polite enough. In an interview to CNBC, he has characterised the departure as 'a statement of dissent'. When reminded that Urjit Patel has quoted personal reasons, Rajan remarked, 'You have to read between the lines'. Apparently the mental scar that Rajan suffered over the way he was treated by the government has not yet healed. However, one expected a little more finesse from Raghuram Rajan.

Narendra Modi's reaction is intriguing.  " He steered the banking system from chaos to order and ensured discipline. Under his leadership, the RBI brought financial stability."

Does the prime minister imply that Raghuram Rajan left the banking system in chaos? Was the financial system unstable under Rajan? Is Narendra Modi praising Patel or blaming Rajan?

Sunday, December 09, 2018

A lawyer's poser to Justice Kurian Joseph


I take the liberty of posting the views of an advocate concerned about delivery of justice:

Dear Hon’ble Justice Kurian Joseph,

Unlike many former judges of the supreme court, even the distinguished ones, you shot into limelight soon after you retired. Not for reasons that did you proud.

You laid down your office a week ago, on the 29th November, and four days later NDTV aired your interview. Sorry, you didn’t shine in the interview – mainly because you spat on the institution you served by attacking, without rhyme or reason or proof, the man who headed it as Chief Justice of India.  

You didn't tell the interviewer anything significant about your contribution as a judge of the supreme court for over five and a half years. Nor about any great judge of earlier times, in India, UK or the USA, who might have inspired you. Nor about improving the administration of justice in the lower judiciary.  All this may be ignored, if the purpose of your interview was merely to mark your retirement.  But not your criticism of a brother judge of the supreme court - Chief justice of India Dipak Misra - against whom you and three other companion judges held a press conference in Delhi last January.  It makes no difference that chief justice Misra had also retired when you faulted him on television.

Some may have presumed that a bit of decorum of a judge in office prevented you in January from revealing more about chief justice Dipak Misra though you possibly had details to disclose. But even after retiring, all you could say against the chief justice are pompous nothings, defamatory and perhaps contemptuous too.  This is the plain truth. May I please explain?

You spoke these words when talking to the television channel, to say what you saw wrong in chief justice Dipak Misra and why four sitting judges of the supreme court, including you, gathered against him and met pressmen in January this year: “The existence of judiciary should be independent. If it is not independent and if it is dependent, the independence of the judiciary which is the hall mark of Indian judiciary is gone. It is shaken……So we found that there has been external influences on the Chief Justice of India, and he has not been making independent decisions …. We discussed. We brought it to the notice of the Chief Justice of India that things are not going in the right direction. ‘You should correct your ways.’  We met him.  We brought to his notice in writing.  Then finally, without finding any result, as I used to say, the barking dog had to bite… We brought it to the notice of the whole nation.”

Before you were interviewed for television, on the same day Press Trust of India quoted you: “The then CJI was remote-controlled by an external source. There was some influence of some external source that was impacting the administration of justice.” When asked to specify the basis of your assertion, you told PTI it was the perception among you and three other judges who figured in the January press conference - and some unnamed judges as well. That’s all.  You told other journalists also about your 'perception' as the basis of your claim. Today’s edition of The Hindu reports that when questioned on proof to substantiate your ‘external influence’ theory you said, “It was a perception. There was a perception in the minds of not only the four of us but among several judges and the media.”  

       I am still searching for maturity and credibility in your statements.  For instance, you didn't reveal how you found that, apart from the four of you, several other judges too had an identical perception of an external influence driving chief justice Dipka Misra. Did those other judges tell you or was it your perception that they had the same perception like yours? Can you guess what an image of yourself you create in the minds of others, Hon’ble Justice Joseph? Litigants will hope you did not decide cases all through as a judge on the basis of  similar perceptions.

Do you realise what a damning criticism you uttered against India's head of the judiciary, with whom you served?  You know that independence is an essential quality of a judge in whom people can trust. If you fault Justice Dipak Misra for lacking in that trait, you portray him as a most unfit judge, even at district level. If you still believe you spoke with responsibility when decrying him, I need to quote more from your interviews to the press and to television and ask you a few things, so you become clearer to those watching you.

The television interviewer queried you on your view that chief justice Dipak Misra was “remote-controlled” and asked, “Who was holding the remote control?  Was it the influence of the government or was it political influence?”  Having been a supreme court judge, you gave this stunning reply to back up your charge: “I … we have no idea as to who was the person behind.  But we were quite sure that the Chief Justice of India was not taking decisions independently… I am not able to pinpoint as to who was influencing him.  But we were much sure he was under some influence.” Well, when you spoke these words you managed not to laugh. What more can anyone say, Hon’ble Justice Joseph?  
                                             
Did your January press conference curtail the ‘external influence’ emanating from an unknown source and affecting Justice Misra? You seemed to believe so when you told PTI recently that the presser “had an impact and things started changing for good during the remaining part of Justice Misra’s tenure as CJI.” So, you say that chief justice Misra was reforming himself and freeing himself from that ‘external influence’ as a result of your press meet in January. But this cause-and-effect story is hard to believe. 

If you cannot pinpoint that ‘external influence’ now, surely you didn't do it while sitting face to face with chief justice Misra in his chamber in the supreme court. By simple logic, three other judges who were with you at the January press meet could not also identify that 'external influence' up till now, since the four of you would have shared any such knowledge among you if even one of you gauged it. Then how did chief justice Misra banish that 'external influence' - when you did not know what it was or where it came from and so the chief justice did not have to fear you exposing him? Or, are you saying that after you and three other judges met pressmen last January the chief justice turned a new leaf on his own and got himself out of that 'external influence?' If indeed the chief justice did so, what kind of a real influence was that ghostly force when its victim could shake it off instantly?  You were a judge, that too of the supreme court of India. Do you sound convincing to yourself, leave alone others? 

      I was also puzzled by  some  thoughts you  expressed to the same interviewer at different stages of a sitting and to different interviewers, and I just couldn’t put two and two together. You told NDTV early on that you didn’t know if the government was the ‘external influence’. Towards the end of your dialogue, when the interviewer asked you, “Will future chief justices be not remote-controlled?” you quickly replied, “Governments will always try to somehow influence the chief justice because they are not happy at all …..”Did you, per chance, let the cat out of the bag? And then, in The Hindu interview of today, you praised both the present Chief Justice of India Ranjan Gogoi, who was with you at the January press conference, and prime minister Narendra Modi for the good rapport between them.

      If  anyone understood or misunderstood you as hinting that the former Chief Justice of India was under the influence of the present government, but that the same government maintains smooth honourable relations with the present Chief Justice of India, the listener or viewer could be left utterly confused. When I see these conflicting pictures coming from you, am I at fault sir?

       When you speak to the public, the public too will speak to you as I do. Also, you fairly told the television interviewer, “People have a right to raise questions”.  So, you won’t surely mistake the questions I have posed here. Your answers could help everyone understand you better.

     Finally, let me ask you.  The Contempt of Courts Act, 1971, defines ‘criminal contempt’ to include any act which (i) scandalises or lowers the authority of any court, or tends to do so; or (ii) interferes with or obstructs the administration of justice in any other manner, or tends to do so. Assume you were functioning as the Chief Justice of India, and that I met you and accused you of being remote-controlled by some external influence which I felt affected the administration of justice. Assume further I admitted that I could not pinpoint or prove who was influencing you and I still demanded that you correct your ways. Then would you not have hauled me up for criminal contempt, and would I not be close to being convicted? And if I laid the same charge against you publicly after you retired as such chief justice, what would you or anyone sensible think of me? Will you please enlighten me, Hon’ble Justice Joseph?

            Warm regards.
                                                                                                        
            R. Veera Raghavan

Thursday, December 06, 2018

Justice Kurian Joseph and Justice C.S.Karnan

Justice Kurian Joseph was one of the judges on the seven-member Bench of the Supreme Court which found Justice C.S.Karnan guilty of foul-mouthing brother judges and handed out a six-month jail term to the latter. Karnan had accused the Chief Justice of the Madras High Court of not assigning appropriate cases to his Bench. He also blamed some judges for 'insulting' him because of his caste. He questioned their integrity in ample measure.

Kurian Joseph alongwith three other judges questioned the 'arbitrariness' of the Chief Justice of India in assignment of roster in various cases. He has also alleged that CJI was remotely controlled by an external force. Being remotely controlled is also a manifestation of corruption. He had earlier questioned the right of the then CJI Khehar to hold meetings of judges during Easter and asked if he would do the same during Diwali or Eid.

Allegations of Karnan and Kurian have many similarities. There is one vital difference though. Karnan had the courage of conviction to battle single-handedly whereas Kurian only toed the line of three brother judges in addressing the press regarding their grievances against the CJI , while in service. He 'disclosed' the remote-control aspect only after his retirement.

Kurian Thomas contradicts himself with ease. One day he says that higher judiciary is free from corruption. Just a few days later he argues that the CJI was remote-controlled. One day he insinuates that the government was remote-controlling the CJI. (Who else can do this now?) Soon thereafter, he hastens to play safe complimenting the prime minister and CJI for holding discussions between themselves.

Allegations of Kurian Joseph are serious though he has aired them irresponsibly and unprofessionally. These charges place the government and the Supreme Court in the dock. It is incumbent on them both to ask him to prove his charges or be prepared to be treated as he and other judges treated Karnan in the Supreme Court suo motu case against Karnan. A delinquent and loose-tongued judge of the Supreme Court deserves to be dealt with at least as firmly as a High Court judge.

Section 2(c) of The Contempt of Courts Act defines criminal contempt as follows:
 "Criminal contempt means the publication (whether
by words, spoken or written, or by signs, or by visible
representation, or otherwise) of any matter or the doing of any other
act whatsoever which-

(i) scandalises or tends to scandalise, or lowers or tends to
lower the authority of, any court; or
(ii) prejudices, or interferes or tends to interfere with, the due
course of any judicial proceeding; or
(iii) interferes or tends to interfere with, or obstructs or tends
to obstruct, the administration of justice in any other manner."

The claim that the CJI was remote-controlled certainly lowers the authority of the court and calls for appropriate response from the court. 

Saturday, December 01, 2018

Corruption in judiciary

Justice Kurian Joseph who retired recently from the apex court has told news reporters:

" I  will never really agree that there's corruption in higher judiciary. If it is in the lower judiciary, it is the state's concern. In the higher judiciary, it has not come to my notice."

The learned judge is wrong on two counts. First, absence of corruption in higher judiciary is too good to be true. What readily comes to mind is the rhetorical statement that absence of proof is not proof of absence. Kurian Joseph was among those who implicated directly or indirectly the then CJI  in a medical college corruption case. However, one fervently hopes that Kurian Joseph's view as stated now, on corruption is true.

Secondly, is corruption in the lower judiciary the concern of only state governments? Can the Supreme Court wash its hands off what is happening in lower judiciary? This amounts to judicial dereliction. Simultaneous display of overreach and dereliction by the apex court may be entertaining but is also deleterious in its implications for the society.

Tuesday, November 27, 2018

Yes Bank

Yes Bank is oddly named. No bank can say 'yes' to all requests from customers. There are better ways of communicating one's positive outlook than through an ill-advised name.

What is in a name? There are occasions when everything is in a name. What is the bank saying 'yes' to? Subterfuges and shenanigans? Ever since RBI stalled Rana Kapoor's attempts to continue as the bank's CEO, many reports have emerged disclosing borrowings by shadow banks (NBFCs) belonging to the yes group from mutual funds on the security of shares in Yes Bank. These loans have been ploughed back into some companies of the group as equity.

These transactions are not unlawful. But when under a regulatory scanner, any ethically dubious transaction is  viewed as an egregious transgression.

These are not isolated transactions. There has been a pattern. There have been marked divergences between NPAs disclosed by the bank and those flagged by RBI. Why did Rana Kapoor take to devious ways when the bank was doing well? Or, was the bank doing well only thanks to these difficult-to-justify methods?

Ashok Chawla could not continue as Chairman apparently because there are some allegations of corruption against him. A whistle blower is supposed to have alleged that the bank's CEO had indulged in corrupt transactions. Coincidental charges against both the chairman and the CEO  make Yes Bank more notorious than ICICI Bank. Neither bank was able to deal with the reputation risk adroitly.

Is there a giveaway in names of organisations? Satyam, Global Trust and Yes - all are indicators of qualities these organisations did not possess!

Sunday, November 25, 2018

Chanda Kochhar and Carlos Ghosn

ICICI Bank's Board continued to express confidence in the bank's CEO despite serious allegations against her which were believed to be true by everyone except the wise Board. Nissan's Board threw out its Chairman relying on accusations believed perhaps only by the Board.

As yet, we do not have the response of Carlos Ghosn to allegations of financial misconduct against him. He was taken into custody the moment Nissan reported the findings of an enquiry. The accused in India are lucky to have the kind of police we have here who will not dare to arrest any influential person whatever be the gravity of offense. In fact, greater the gravity, the lesser the chances of arrest !

It is said that the offences that Ghosn is deemed guilty of, namely underreporting of income and personal use of company's assets, are not uncommon even in Japan and therefore do not invite the wrath of law-enforcing agencies. It is further argued that the Japanese do not want a French company, Renault, to dictate to Nissan. This 'nationalistic spirit' has led to the downfall of Carlos Ghosn reputed for his cost-cutting efficiency.

Japanese are known to be loyal to their bosses. It is therefore surprising that Ghosn's protege Saikawa, Nissan's CEO, let him down by propagating the alleged charges. Does it mean that the Japanese are loyal only to Japanese bosses?

Born in Brazil to Lebanese parents, Ghosn is a French citizen leading, among others, a Japanese company. Truly a global citizen, it is ironic that he has come to grief the way he did falling a prey perhaps to 'Japanese jingoism'.

Thursday, November 01, 2018

Viral Acharya's fulmination

Delivering the A.D.Shroff Memorial Lecture in Mumbai recently, Viral Acharya, a Deputy Governor of RBI spoke at length about the importance of independent regulatory institutions. He emphasised that the risks of undermining the independence of a central bank are potentially catastrophic.

He classified economies as either value-enhancing or rent-extracting. Reduced independence of the central bank would promote rent-extraction and thus corrode economic efficiency.

Methods adopted to rob the central bank of its independence include a)appointment of non-technical people in senior management, b)erosion of statutory powers of the central bank, c)preference for discretionary policies over rules-based policies and d)establishment of parallel regulatory agencies.

In order to ensure independence from the government, the central bank needs sufficient reserves of funds and definite rules for apportionment of profits including transfer of profits to government.

Governments that do not favour independent central bank attract market wrath and ignite economic fire whereas others enjoy cheaper funds and support of international investors.

All these are unexceptionable motherhood statements. Acharya  wants the government to desist from seeking higher share of profits (present and past) from RBI and interfering with central bank's guidelines on delinquent borrowers.

Is Acharya justified in expressing his angst in a public forum? Independence of RBI has to be reflected in the strength of RBI's Board of Directors to be unswayed by extraneous influences. Acharya as a member of RBI's Board ought to have taken the Board into confidence and it was for the Board to send a message to the government.

Friday, October 26, 2018

CJI's faux pas

CBI Director Alok Verma's petition was heard by a three judge bench in the supreme court today. CJI Ranjan Gogoi was one of the three judges. Alok Verma has pleaded that CVC does not have the authority to insist on his proceeding on compulsory leave. Only the Appointments Committee of which CJI is an ex-officio member has the power to do so.

So the plaint was in effect telling the CJI, "Your powers are misused by the CVC." CJI himself cannot sit in judgment over usurpation or otherwise of his own joint-powers. This would amount to clear conflict of interest. It is a different matter that the court came to an impartial view that they would await report of the enquiry against Verma.

Lawyers like Prashant Bhushan who invent conflict of interest even if there is none preferred to be silent. Perhaps they do not want to be offensive towards the new CJI so early in his tenure as CJI and thereby antagonise him. Rahul Gandhi's demonstration for restoration of Alok Verma's powers and subsequent courting of arrest betray lack of appreciation of crucial issues involved. His consistent inability to rise to the occasion and play a responsible role as an opposition leader makes him undeserving of presidentship of the Congress party.

Thursday, October 25, 2018

Masterstroke or manipulation?

CBI is suffering from autoimmunity. Instead of acting against corruption among public servants which is its mandate , it is attacking itself. The internecine battle between the Director Alok Kumar Verma and Additional Director Rakesh Asthana has been momentarily halted by CVC's order issued during October 23- 24 noctural hours. The scene now shifts to the Supreme Court which will have a preliminary hearing on October 26th on Alok Verma's petition against the CVC order forcing him to go on leave. The Chief Justice cannot hear the petition because he is ex-officio a member of the committee in charge of selection and transfer of CBI Director.

Congress party which opposed Verma's appointment as CBI Director is now 'making amends' by condemning the action against him. Political opportunism? Opposition parties do not question Verma's action of divesting Asthana of his duties at 9 p.m. but they are outraged that CVC passed its order late night.

Verma vs Asthana is only a proxy for the bigger battle that is raging between Congress and BJP. BJP's repeated attempts to 'prove' the 'corrupt deeds' of Congress leaders are checkmated in various institutions by individuals allegedly owing allegiance to Congress. It is no wonder that a politically polarised institution like the CBI is functionally paralysed. What is even more worrisome is the possibility of political balkanisation of even the judiciary. Serial reliefs extended to P.Chidambaram from custodial interrogation is a painful pointer.

There is a view that the Committee in charge of appointment of CBI Director alone could have taken the decision to ask Verma to proceed on leave. It appears that the government did not exercise this option because the government would have been helpless if the CJI and the Congress representative did not favour CVC's proposal. 

Wednesday, October 17, 2018

Sabarimala

As the Ayyappa temple is about to reopen today after a scheduled recess, there is a lot of tension not only in and around Sabarimala but in entire Kerala. Could this imbroglio have been avoided?

In the year 1991, the Kerala High Court decided that the traditions of the temple could not be trifled with. After many years, the Supreme Court took up a case seeking permission for all women to enter the temple on the plea of gender equality.

The courts in a secular country ought to avoid pronouncing on religious issues as much as possible. In order to side-step the issue and in view of preponderant aversion even among women in Kerala for allowing all women to enter this particular temple, the right thing for the Supreme Court would have been to get the views of aggrieved party. The aggrieved party is the woman of Kerala and not the publicity-seeking activist-tourist-provocateur. A referendum among women of Kerala should have been ordered.

The Supreme Court did not take this sensible decision because it did not have the benefit of having any judge who understands the traditions of this particular temple on the Bench. Governments - centre and the state - could have suggested this fair and logical step. Unfortunately, even the Supreme Court is not free from the desire to look like a champion of women's rights. If the SC is really a champion of women's rights, it would have opted for the referendum route.

A question might arise as to whether our Constitution provides for a referendum. The court could have relied on its contemporary fetish for 'constitutional morality' and 'silence of the constitution'. It is an irony that the only female judge on the Bench alone could understand the relevance of tradition while ostensibly enforcing gender-equality.

Monday, October 15, 2018

The Hindu LitFest 2018 Dialogue

Gopalkrishna Gandhi and Shashi Tharoor engaged in a freewheeling discussion on "India: Issues and opportunities" in Chennai on October14th. The event was to start at 6 p.m. The discussants were called to the dais around 5.55 p.m. Tharoor remarked that Chennai is the only place where programmes start even ahead of schedule. But that was not to be. Gandhi delayed coming to the dais. Was it because of Rahu Kalam ending only at 6 p.m.?

The discussion started on a neutral note with Gandhi equating BJP and Congress for their misdemeanours. He referred to corruption as 'swaroopa' of our politics, hypocrisy its 'svabhava' and inefficiency its style. Tharoor quoted his father telling him that India was not only the world's largest democracy, but it was also the largest hypocrisy. Probably apocryphal.

Gandhi observed that Delhi anti-Sikh riots were Congress's shame analogous to BJP's Gujarat riots. Tharoor's response that the difference lay in Congress learning from its mistakes and reforming itself unlike BJP was rather unconvincing. Gandhi was also critical of Congress trying to impeach the former CJI. Tharoor wriggled out of this claiming he was not privy to this since he is not a Rajya Sabha member. This escapist argument was seen as a honest disclosure by Gandhi !

Perhaps to Gandhi's hidden delight, Tharoor narrated instances of BJP's contempt for democratic politics. He compared BJP's aversion to dissent in the party with Congress's acceptance of dissent. Pot calling the kettle black?

When Shashi Tharoor and Gopalkrishna Gandhi discuss especially under the auspices of The Hindu, one cannot expect the discussion to be anything but one-sided. And so it was. It was disappointing for one more reason. The focus was rarely on opportunities.

Saturday, October 13, 2018

Judicial overreach

Congress party keeps accusing Narendra Modi of crony capitalism and corruption in the Rafale story. BJP wonders why the Congress is not approaching the courts. Congress may similarly wonder why the BJP is not seeking judicial remedy in case Modi is honest and he is defamed by the Congress.

The answer is simple. People want to avoid approaching police and judiciary as much as possible. Police would harass the complainant. Courts would test the patience of petitioners. Filing cases in our courts would result in loss of money, waste of time and all these without a guarantee that justice would be delivered.

In this milieu, it is distressing to note that the Supreme Court is widening its powers by invoking concepts like constitutional morality and constitutional silence.

What is constitutional morality? We understand constitutional principles. Who knows what is constitutional morality? It is what the judge says it is ! Is morality not indivisible? Do we have political morality, administrative morality, medical morality and so on? We have overarching principles like primacy of truth and merits of  honesty which are applicable across the board. Inventing a new kind of morality like constitutional morality will only make the legal conclusions unpredictable and more at the mercy of subjective views of judges.

Under the concept of constitutional silence, courts will go beyond interpreting the constitution's various articles and start guessing what the constitution-framers intended but failed to provide for. Are judges so exclusively empathetic of the constitution-makers?

Thursday, August 30, 2018

Is Supreme Court trying to redeem itself?

Internal Emergency declared by Indira Gandhi was upheld as lawful by the Supreme Court and was welcomed by vast sections of non-political citizens as a welcome relief from anti-social elements keen on spreading chaos and disorder. Indians lost their freedom of expression. Yet they were happy that a sense of order was getting restored. As it was said both thankfully and sarcastically, "trains started running on time."

Emergency was misused by unconstitutional elements like Sanjay Gandhi to impose their writ on the nation. Millions who had earlier welcomed Emergency got disenchanted and threw Indira Gandhi out of power. Emergency was justified as a welcome tool to fight disorder. It was, however, used as an unwelcome  instrument to oppose dissent.

Now the Maharashtra government has arrested a few individuals who are allegedly supporters of Naxalism, a violent movement against the state. Government could not produce any detail which would warrant arrest when the matter was taken up in the Supreme Court by Romila Thapar and others. In the normal course, the petition would have been dismissed as the petitioners are not the alleged victims and the latter had already approached some High Courts. The Supreme Court which is hailed as a 'sentinel on the qui vive' (regrettably, wrongly) probably saw this as an opportunity to rid itself of the slur as the defender of Emergency and started hearing the petition. Governmental sloppiness in presenting relevant materials forced the court to adjourn the hearing to next week.

It is hoped that the Supreme Court will hear the petition and come to a conclusion based solely on merits of law without being under an obligation to disabuse itself of the notorious appellation earned during the Emergency. The Court has to defend the law and not necessarily its image. Image is fickle. Rule of Law has to be sustained. The alibi that the alleged criminals are intellectuals and therefore the charges are false is irrelevant.

This is not the first time that some of these alleged criminals like Vara Vara Rao are arrested. It is equally amusing that they have not been convicted in any case so far. Is the government paranoid or simply sloppy in its prosecution?

Sunday, August 12, 2018

Risk Management and Leadership

Careers of Paresh Sukthankar and Nachiket Mor lend themselves to an interesting comparative study.

Both rose up the corporate ladder at a young age. Both are deemed experts in Risk Management. Both quit their positions in giant banks when they were about to be considered for elevation to the corner office.

Though we may never know why they made unexpected departure, we may engage ourselves in some guesses.  Were they given hints that they were not suitable for CEO position? Is relentless focus on risk mitigation a minus point for aspiring CEOs?

Perhaps more probably, their obsession with business risks made them develop cold feet when it was time to don the leadership mantle.

Wednesday, August 08, 2018

Karunanidhi: Self-made, strong-willed and self-centred

Call him Dakshinamurthy (his original name) or Karunanidhi. Both names fit him to a T. He was one of the most popular leaders in the south and among the South (North-South divide in terms of economic disparity.) He was compassionate towards the downtrodden and the marginalised.

He did not have parental support, unlike his children or grandchildren , to lend him a hand either in politics or in filmdom. He did not have a godfather to proffer preferential treatment to him in cinematic or literary or political world.

His determination to succeed was phenomenal. After Annadorai's untimely demise, he rode roughshod over Nedunchezhian and Anbazhagan to seize control of the party and ministry. Neither Navalar nor Perasiriar was any match to him in scheming or steely determination to capture power. Kalaignar was totally result-oriented. He proved to be a capable administrator and a convincing speaker. His letters to his 'udanpirappu' in Murasoli were a delight to anyone interested in Tamil. His interpretation of Thiruvalluvar's masterpiece written as 'Kuraloviyam' was creative though many would disagree with his views.

He was self-centred to the hilt. When the Congress leaders wanted to bury Kamaraj at the Marina, he denied permission as Chief Minister. He would have thought, "If I permit Kamaraj, where would I go and rest?" He would scarcely have thought that two other equally popular leaders - MGR and Kalaignar's bete-noire, Jayalalitha - would precede him in occupying the Marina.

The TamilNadu government was against his burial at the Marina. The Madras High Court in a hasty judgement that has less to do with law and more to do with the anxiety to ensure law and order vetoed the government decision.

There was no doubt about his popularity and his ability to nurture the DMK. However, his self-centredness arrested the continued growth of his party. He did not mind losing Vaiko when he was at his best from the party because Vaiko was a threat  to Stalin. He wanted his family members to lead the party.

Politics will be less colourful with his demise. Tamil enthusiasts have lost a mesmerising orator.

Wednesday, August 01, 2018

Director remuneration

Shareholders are becoming increasingly sensitive to payment of exorbitant commission and sitting fees to non-executive directors and unconscionably high salaries to executive directors. Shareholders' ire is reflected in the questions raised by them in AGMs.

In the case of IDFC Bank, many shareholders pointed out that enhancing the already high remuneration to directors especially when the company's performance is deteriorating does not make sense. Rajiv B Lall, the Managing Director, responded that he would take what the shareholders permitted. It was not clear whether this was a smart response to silence the vocal and helpless shareholders or a serious and well-meaning response. This was not tested by any shareholder.

Some shareholders suggested that directors on their own should cut down payment to themselves without any prompt from shareholders. Of course, it was all a drama. There was no impact. Accountability of directors, executive or non-executive, continues to be a myth in India.

Tuesday, July 31, 2018

IDFC Bank: Board capture by MD?

Rajiv B.Lall, CEO & MD of IDFC Bank is a very articulate person. He makes exhaustive presentations about the bank in AGM. He is the founder MD of the bank.

The bank, an offshoot of IDFC, is only 4 years old. Its performance is lacklustre and this is amply reflected in its financials. Sensing that some drastic steps are needed to change the bank's fortunes, he angled for the bank's merger with Shriram group. The talks floundered and now merger with Capital First seems to be on.

Merger is a policy decision and therefore must have been debated upon extensively by the Board. In the bank's AGM on July 31st, all questions raised by shareholders were answered only by the MD irrespective of whether the questions related to policy or operations. This was surprising because there are some eminent members in the Board.

This only means that Lall has effectively captured the Board and his writ runs all over. After the merger, he becomes non-executive Chairman. V.Vaidyanathan, the promoter of Capital First will be the MD & CEO. If Vaidyanathan is as eloquent and assertive as Lall, interesting developments may be seen. Whether it is good for the bank remains to be seen.

Thursday, July 19, 2018

Sundaram Finance vs Cholamandalam Finance

Sundaram Finance and Cholamandalam Investment & Finance Co. are the two main NBFCs in Chennai. Following partial comparison is based on their 2017-18 annual reports. Does this communicate something? (Figures of Sundaram Finance appear first.)

                                                                                     

1
Net Profit (Rs.crore)
532.95
974.12
2
Earnings per share (Rs.)
 47.97
  62.32
3
Dividend increase over last year
  4.3%
  18.2%
4
Payment to non-executive directors (Rs.lakh)

126.95
62.22
5
Payment to whole-time directors as percentage of ceiling
12.84
 1.33
6
Total managerial remuneration as percentage of ceiling
13.07
 4.18
7
Remuneration to CFO (Rs.lakh)
164.08
123.12

Monday, June 18, 2018

ICICI Bank's laughable statement

ICICI Bank's Board has said, "In line with the highest levels of governance and corporate standards, Ms. Chanda Kochhar has decided to go on leave till the completion of the enquiry as announced on May 30, 2018.
The Board has noted and accepted this."

This is indeed funny. The Board continues to be servile to the bank's MD & CEO. Chanda Kochhar has suddenly discovered that there is something like governance and corporate standards.

The Board has lost an opportunity to prove its undying loyalty to Chanda Kochhar by refusing her 'offer' to go on leave. The Board must have responded by reminding her that the bank cannot survive without her at the helm. 

Sunday, June 03, 2018

Cost of defending Chanda Kochhar

ICICI Bank continues to pay a heavy price because of its crude attempts to defend its MD. M.K.Sharma whose reputation was uncompromised till he gave (or was forced to give) a clean chit to Chanda Kochhar, is reported to have decided not to seek another term as non-executive Chairman after his present term expires on June 30th.

The Board (or should we say Chanda Kochhar) is actively looking for his replacement. A newly appointed Director, M.D.Mallya seems to be the most likely replacement. This also raises suspicion as to why he was taken in as a Director. Was the intent to make him the Chairman? Is there an undisclosed motive in the recent appointments of Radhakrishnan Nair and M.D.Mallya as 'independent' directors?

The Economic Times reports that many reputed industrialists and former bankers have declined to join the ICICI Bank Board because of the controversy surrounding Kochhar. Is she indispensable to the bank? Is it worth sacrificing governance norms and forgoing services of eminent possible directors in order to enable a person to sustain her position in the bank?

ICICI Bank ought to know that it is an international bank and therefore ethical standards expected of it are way above what we expect from a sole-proprietorship enterprise.

Power of ICICI Bank

ICICI Bank is among the largest private sector banks in India. Its influence in government and related circles seems to be strong and toxic. The Indian Express has reported that all newly-appointed members of BBB barring one have connections with this bank.

Recently in the first week of May, one Mr. Radhakrishnan Nair was appointed by the bank as an additional Independent Director. It remains moot if this was done after coming to know that SEBI was about to question the bank regarding recent developments. Mr.Nair had earlier worked as an Executive Director in SEBI. Wheels within wheels?

Reports suggesting that Chanda Kochhar has been advised by the Board to go on leave created hopes that the bank was perhaps not all that averse to adherence to principles of governance. These incipient hopes were dashed when the bank clarified that the Board has not tendered any such advice. We should have been wiser. How would the Board which is a convenient creation of the MD ask its creator to go on leave? Indications are that we have not yet heard the worst about the bank.

Monday, May 07, 2018

Chairperson and CEO

It is almost unanimously argued that the Chairperson and the CEO  need to be different persons so that corporate governance will not be adversely affected.

The Uday Kotak panel on corporate governance listed six advantages of such a split. These are 1) It provides a structural advantage for the Board to remain independent, 2) it reduces excessive concentration of authority in a single individual, 3) the split clarifies the respective roles of the chair and the CEO, 4) it ensures that Board's tasks are not neglected by lack of time for a single individual, 5)it increases the probability of both persons possessing required skills for their respective positions, 6) it creates a Board environment that is more conducive to debates and is more egalitarian.

If these advantages are absolute, Chanda Kochhar could not have cocked a snook at the Board of ICICI Bank. She has captured the Board despite the presence of a knowledgeable Chairperson. One clear lesson from the ICICI Bank drama that continues to play out is that it could be very risky to have a prima donna as a CEO. Corporate Governance depends on personal ethics of Directors and not necessarily on structural arrangement. Some times, presence of a structural arrangement like separation of two roles only introduces a moral hazard that all stakeholders will be led to assume that governance is intact even when it is already in tatters. If anything, Chanda Kochhar has proved that structural safeguards are at best deceptive and misleading. Having proved that, it is now incumbent on her to move away.