Kamal Ghorui
Study of India Corporate Business shows that Promoter Families still lead the majority of Business transactions (B to C) – in Values, Ownership, Linkages. When you have such a clear Business advantage, it does become somewhat incumbent on these Promoter Families (large, medium, small) to do a rethink of their place, position, responsibilities in India corporate business space.
Some areas where a clear rethink (to add greater value to the nation) is very necessary are as under, since the Business environment is becoming very complex:
- Develop and Nurture an Indian Business Management style.
For too long have we aped and copied the American Business style. This could be because the Promoter Family children have studied at leading USA Universities. However, we must not keep making the mistake of blindly copying the American Business Management style. The World has corporates and we are all aware that beyond American style of Business management there are other styles – European (German, Italian, French), British, Chinese, Japanese, Korean, Vietnamese, etc. In the competitive world today, the other nations are not just holding their own but defeating American corporates. India itself has a business policy ingrained in the way we function, a business philosophy from centuries passed down. Indian corporates need to make a mix & match, to arrive at a new Corporate Business Management style. The copy / paste of American corporate management style will not work.
- Focus on India as a market to be re-developed.
In the decades leading to India Independence, we had nationalist Indian promoters who despite no government support laid the base (although not very broad) for Indian industry to deliver quality and ‘value for money’ products to Indian consumers. Sadly, we lost the faith and the Indian consumer was devalued, product and services quality deteriorated. Our Infotech (IT), pharma and textiles industries (to name some) focused on the overseas developed countries market, forgetting that there is a market within India (but cost conscious). Instead of improving product and service quality to the Indian consumer – for supposed better price realization and margins, we neglected the Indian consumer. This is the reason why India is facing IT challenges today. We never developed IT systems / products which would have value for the India personal consumer market. China & Japan followed another path in IT and have captured the world personal IT games and apps usage market. In IT, we focused on the overseas corporate customer, leaving the individual customer for others. In pharmaceuticals, we ceded control to China of the active ingredients in formulations. We are proud of India quality generic formulations but forget that China is the largest manufacturer of the active ingredients. We are dependant on China. Even in textiles – our weaves, colours, designs are still not on the international radar. Unique garments for Indian consumer tastes is not really an area of attention. By not focusing on the India market, we did not prepare for international products which grab attention. We are willing to let the tide rise and fall. Never sailing far on our own. - Respect the non-family shareholder and build in compliance into the business methodology.
There is no doubt that the minority (non family) shareholders (including institutional shareholders) are tolerated as a problem to be managed. The explanations for management actions in exiting a business or acquiring a business are very skimpy and hardly disclose any worthy information. That the minority shareholders are also part of the business owners is forgotten. They are expected to be happy with the crumbs falling off the Table (dividends, bonus shares, etc). To some extent financial institutions – if they are shareholders, carry a responsibility to look after the interest of individual shareholders. This does not seem to be happening. On the matter of compliances (quality standards, accounting standards, ISO standards, products environment safety standards, regulatory standards, etc), India corporates have not woven these requirements into ‘the way to do better business’. Compliance is considered as cost and to the extent possible danced around. Is it any surprise that one reads so much about defective products quality, failure of production sites to pass international quality standards? Why do Indian Industry groupings not fix a set of compliance parameters that all members must follow. India corporates will need to be very mindful of quality compliance.
- Having an age limit to positions of Key Management Personnel (KMP).
Business is becoming complex and technology is constantly shifting and developing. If the business of India promoter families is to grow and not fail, the KMPs cannot be in their 70s and 80s in age. There are 2 reasons why the KMPs do not retire – the inability to relinquish position of power and remuneration or there is no worthy successor in the Family who can take up this Role. It is an international failure (not just Indian) that people in powerful positions do not make way for somebody to step in. In India, it has been seen that Chairmen & Managing Directors of Family Business Group entities who age and do not step aside are slowing their corporate business. There is no new lens for viewing opportunities and rethink issues. No new work style, new structures, new ideas develop. Stagnancy comes into the business. It is here that the Central Government along with Financial Institutions must draw a line in concrete that beyond say 70 years of age, there cannot be a person in KMP position. Executive authority must go at 70 years of age. This will start a process of hunting for suitable successors. At some time, a successor will need to come. Why force an entry when the entry can be organized?
India Business Family Groups must understand that they are in extremely important position from a national benefit and welfare perspective. They have to look up and have a longer vision. The sooner the above requirements are coded into Business Work style, the result will be beneficial for the entire country.
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