Is it responsible business?

NDTV Profit has published a news under the heading  'In India's cheap car boom, poor labourers pay a big price'. The news reports that every year, more than 1,000 workers in the auto hub (in Manesar, which is near Gurgaon in Haryana, India), most below 23 years of age, are injured seriously and lose t heir livelihoods. Workers in factories, which are at th e bottom of the value chain and manufacture auto parts, work for twelve hours a day and earn Rs 200 (approximately US $3) per day. Most of them are contract workers who often have little or no access to safety equipment or health benefits. Workers are asked to operate machines without proper training. Main reason for accidents is violation of safety rules.

The parts are manufactured for leading automobile manufacturers in India. The principle of responsible business requires that a responsible company should ensure that good governance practices, including safety norms and ethical standards, have been adopted by each member in the value chain. Leading automobile companies have failed in this respect. They should be hold responsible for accidents in entities, which are at the bottom of the value chain. Unfortunately, Indian law does not hold them accountable for such accidents. Adoption of Responsible Business Guidelines (National Voluntary Guidelines on Social, environmental and Economic Responsibilities of Business) issued by the Ministry of Corporate Affairs, Government of India, is voluntary.

Auto sector is highly competitive. Therefore, the focus is on targets and cost cutting. Compliance of the principles of responsible business requires allocation of additional resources and allowing sub-contractors to earn reasonable profit to enable them to adopt good practices. Therefore, compliance to of soft laws is not a priority.

This is an example that even reputed companies do not follow the principles of responsible business.  It is necessary to remedy the situation.

Aspirations of educated youth!

Times of India has published a news today (January 22, 2016) with the heading '19,000 graduates, post-graduates, MBAs, BTechs apply for 114 sweepers' jobs in UP town.

The job was advertised by Amroha Municipality. The salary is Rs17,000 per month. The post does not require educational qualification because the work involves manual labour like cleaning streets with brooms, maintaining drainage and municipal sewer lines. The news paper reports that Balmikis, the dalit community whose traditional job is sweeping, have opposed the recruitment, as they are demanding th at th e job should be reserved for the Balmiki community.

Some may consider the news heartening, as it indicates that educated youths have understood the 'dignity of labour' and  are not shy of taking up menial jobs. But the reality is that the salary is enough to attract  young people who have completed higher education, particularly because it is a government job. They cannot aspire for better jobs. I can imagine that there are not  many 17,000 rupees a month jobs available in Amroha. Even in metros, entry level salary in call centres, which employ large number of graduates and post graduates, is below Rs 10,000 a month. The entry level salary for MBAs from lowly rated institutions is around Rs 10,000 a month. Even some professional accountants accept jobs with salary around Rs 15,000 a month.

Higher education in India does not guarantee a livelihood. Many of the graduates and postgraduates are not employable in the jobs that are available in the market and the number of jobs is less than the demand. Only those who are above average performers can get a job to support a decent livelihood. Therefore, it is a sin for a below average performer to aspire for a decent living. The fault lies with our education system, which offers useless diplomas and degrees but fail to impart skills and knowledge.

We need to create jobs and build capabilities needed for those jobs rather than distributing degrees and diplomas. Our education system results in waste of resources and few vital years of young people. We should close down some institutions imparting higher education and build more institutions for imparting vocational training.

Infosys - Indpendent director - close relatives of ministers and politicians

The news that Infosys has appointed Ms. Punita Sinha wife of Union minister Mr. Jayant Sinha has raised the debate whether a company should appoint the close relative of a minister or politician, who meets the fit and proper criteria, as an independent director in the board.

Independent directors prime responsibility is to protect the interest of the company by closely monitoring the management. The resource dependancy theory suggests that independent directors brong variey of resources, particularly through net working and thus, create value for the company. Therefore, companies prefer to appont highly net-worked individuals as independent director. There is nothing wrong in it.

On the face of it there is nothing wrong in Infosys appointing Ms. Punita Singh as an independent director on the board. However, keeping in view the culture of crony-capitalisms and politicians using their clouts in the government to benefit companies, the allegation of nepotism cannot be wished away. Therefore, it is better to avoid appointment of close relatives of ministers and politicians as independent director. While saying so, I must mention that in an environment of crony-capitalism there are many ways to appease ministers and politicians without drawing the public attention.

I do not see reasons for paying too much attention to the appointment of Ms. Punita Singh as independent director of Infosys.

Business Schools - can they produce leaders?

The news that that Indra Nooyi becomes 'most generous graduate' of Yell School of Management has an important quote from Ms. Nooyi. The following is the quotation from the news item:

The PepsiCo chairman, who graduated from the school in 1980, credited her experience at the school for “forever” altering “the course of my life” and said her gift “pales in comparison with the gift that Yale gave me the fundamental understanding that leadership requires an expansive worldview and a deep appreciation of the many points of intersection between business and society.” 

I believe that business schools cannot produce business leaders. I think that Ms. Nooyi is a born business leader and Yale Management School had nurtured it. But that is a great contribution. 

Indian business schools should aim to transform lives rather than creating graduates who learn  subjects  at superficial level without deep understanding. This is a difficult proposition. But we should aim for the same. The first step in achieving the goal is to transform business school teachers. Top IIMs and government should join together to create a pool of teachers who will adapt the new approach of 'transforming lives' towards business education. 

Strategy: The role of the board of directors

My article in Riverside Management Academy Private Limited's website.

Wish list for better corporate governance year

My column in today's (January 11, 2016) Business Standard