The less that is said about Indira Gandhi, the better.

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The less that is said about Indira Gandhi, the better. For, she was the champion of the poor. We know about her ‘garibi hatao’ slogan, nationalisation of banks, and many other pro-left, pro-poor, pro-protectionist policies. She believed that growth has to be combined with measures to ensure the well-being of the poor. “Any severance of the vital link between the needs of growth and of distributive justice will produce stagnation or instability. Both must be avoided,” she said in her Election Budget speech.

Even Manmohan Singh couldn’t avoid it. Anyway, he had moved from the South-South end of the economic ideology spectrum to that of the globalisation one during the 1980s and early 1990s. So, he knew the best of both worlds. “We also recognise that the fruits of growth will take time to reach some of the poorest and weakest sections of our society. To ensure that they too derive benefit in the short run, we have given the highest priority to strengthening programmes of rural development, employment generation, primary education, primary health and other key social sector programmes. These programmes… are beginning to have desirable effects on employment and poverty,” he said.

Therefore, it wasn’t surprising that Chidambaram did the same in 2008. He used a similar language to emphasise more on UPA’s rhetoric of ‘inclusive’ growth. I am sure that the men advising the current FM must have simply picked up the past Election Budget speeches, borrowed a few proposals, a few phrases and sentences, and sent the cut-and-paste job to the government’s printing press. I am sure that these advisors must have been relieved that they didn’t have to think much, or do much work this year. It was so easy this time.

What proves my theory that Finance Ministers simply borrow from past speeches, when it comes to presenting an Election Budget, is the fact that their schemes and proposals to help the poor (read: key vote banks) are almost the same. Only some of them take the pains to tinker with past policies. For instance, unemployment and, therefore, a proposal to launch a rural employment scheme, is an irresistible subject. In some form or the other, the idea keeps coming back like a bad penny.

As Indira Gandhi said: “The provision of adequate employment opportunities is not just a welfare measure. It is a necessary part of the strategy of development in a poor country, which can ill-afford to keep any resources unutilised or under-utilised.” Chavan went a step further and, like Chidamabram, decided that the then restricted National Rural Employment Programme “will operate throughout the country and will be funded 75 per cent by the Centre (emphasis ours).”

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Bribes, Sex and Lies

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For Volkswagen’s Chairman, it’s the beginning of the end at best and the end itself at worst. And only because he just made a wrong choice a decade back

There are two obvious paths to fame; one is through diligence and sincerity and the other, through treacherous but easy freeway of dishonourable shame. And all along you hear of the arduous zeal, passion and commitment of those holding the sceptre over billion dollar isles. But how about an easy imagination exercise? Confused?! Well, there of course have been those unlucky few who have broken the speed limit on the freeway and are now being handed a tough ticket by the law – the former CEO and current Chairman of the €44.5 billion giant German automaker Volkswagen (VW), Ferdinand Karl Piëch falls into the same category. He has been accused of bribery, endorsing company slush fund to pay for prostitution, sponsoring expensive leisure trips for members of the VW Works Council, as well as regular visits to brothels, cash gifts for their wives and even free supplies of Viagra, during his decade-long reign as the CEO of Europe’s biggest carmaker between 1993 and 2002.

And if you thought that this was some bolt from the blue for VW stakeholders, you couldn’t be more wrong. As per an insider, this wide-scale and gut-wrenching practice had existed for close to a decade, albeit behind closed doors. And why do we blame Piëch for it all? Well, isn’t a CEO supposed to ensure ethical practices within his boundaries? And when he derives personal benefits out of it, why would he bother in his decade-long reign to put his foot down? He didn’t and there he stands today before an enraged German public and the German Labour Bribery Court, fighting desperately to prove his innocence.

The current turn of events (which included the most recent January 9, 2008 trial of Piëch) is just a culmination of the scandalous developments which first surfaced in 2005 when the then CEO Bernd Pischetsrieder learnt about the existent corrupt practices. Apparently, the company had set up a camouflaged multimillion-dollar slush fund to pay off powerful employee representatives (in the form of ‘special bonuses’ and ‘expensive free tours’), which prominently included the former head of the Works Council – Klaus Volkert and his management liaison, Klaus-Joachim Gebauer.

Going against the testimony of Piëch, Volkert went public and announced, “All I know is that there is very, very little that went on at Volkswagen that Piëch didn’t know...” As per a Volkswagen secretary, she was even mandated by Piëch to rent an apartment for officials to use for prostitution acts. However, Piëch claims innocence as thus, “Had anything reached my ears, I’d have vehemently pursued it and put an end to it!”

Known as the tyrant who held dictatorship powers at the auto major’s headquarters in the north-central German city of Wolfsburg, the 70-year-old Piëch is the grandson of Ferdinand Porsche. He joined Porsche in 1963, and was instrumental in the roll-out of the 5000cc Porsche 917. He also played a pivotal role in VW’s successful acquisition of British brands – Rolls-Royce and Bentley. Piëch has always been known for his aggressiveness and his urge to venture into newer markets. He retired from the VW management board in 2002 and half-a-decade later, faces a high-profile trial in Brunswick.

On his part, Piëch denies having any voluntary involvement in unethical acts. He justified that “I did not concern myself with this. I was at no point during my time on the executive board aware of the abuse of expenses by the works council. At no point did I hear about any irregularities and the treatment of labour leaders wasn’t in my field of responsibilities at the management board.”

However, the effect of this trial on the automaker’s share price has been really depressing. Its share price on the Frankfurt exchange as on January 18, 2008 stood at a pathetic €150.1 – 23.84% lower when compared to a four-month high of €197.6 as on October 31, 2007.

To make accusations lighter, Piëch told prosecutors that he was not directly involved in corruption but delegated it to Peter Hartz, Piëch’s former personnel chief, who was found guilty in another trial last year of allowing payments to Volkert to maintain good relations with employees.

Confirming the same, Hartz admitted that he paid about €2 million annually to Volkert in illegal bonuses (to be moved to the slush fund) and was sentenced to a two-year imprisonment and €500,000 in fine. Surely, with many names coming to public attention, there remains one fact – Piëch had many associates, but remains the prime accused as proven by a document furnished by Johann Schwenn to German Labour Bribery Court. Even Volkert’s attorney confirms Piëch’s total involvement in the scandal through a document, which stated that instead of 40% of his last salary, Volkert was to receive up to 50% upon retirement. The document bore signatures of both Hartz and Piëch, thereby confirming that Piëch was aware of the irregularities taking place in the company.

Apparently, recent revelations have shaken up Germany and despite having earned glory for his aggressiveness; all that Piëch can do for now is to hope that his dark past casts no shadow on his future. It is not unknown that Piëch drove VW away from carrying an ordinary ‘car of the people’ tag to become a rival to BMW and Mercedes; however, for all the Piëches to become, it is more critical to realise pro-actively that ‘bribes, sex and lies’ and ‘business’ are two ends of a compass. Piëch chose his direction, the wrong one.

B&E edit bureau: Savreen Gadhoke

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
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His Long Journey

IIPM : EXECUTIVE EDUCATION

Shravan Gupta is a data-driven CEO, who thinks big. By GYANENDRA KASHYAP

“He is a busy soul,” says D. Kohli of Torque PR, who worked closely with Shravan Gupta in the past. It seems like perfect description for an entrepreneur, who challenged the status quo, dared to tread the less-trodden path, and pushed the family business into uncharted waters. Shravan, Executive VC & MD, Emaar MGF Land, represents the ambitious breed of realtors who wish to bring in an infrastructure revolution in the country. Says Satish Kannav, Analyst, Arihant Capital Markets, “We saw the era of IT, now real estate is the sector to look out for. Major real estate players will be the Infosys and Wipro of tomorrow.”

So, what has Shravan really done? First, he spearheaded MGF’s (Motor and General Finance) diversification into real estate. This was when he realised that the margins in the traditional financing business were shrinking and eroding, and competition was likely to intensify as leading banks entered the retail and personal loans segment. His realty plans were measured too. “He is a data-driven man,” exudes someone who works closely with the group, about this graduate from SRCC, Delhi University.

Once convinced, Shravan thought big and different. For instance, MGF joined hands with Emaar Properties, one of the world’s leading real estate companies that built the world’s tallest building, Burj Tower, to bring in the largest FDI in the real estate infrastructure sector. Analysts agree that the alliance was one of the turning points for MGF, as it was catapulted into the big league that includes names like DLF.

Explains Ginetta Vedrickas of India Development Forum, “Having taken Dubai skywards, Emaar is doing the same in India.” Adds Rajan Ahuja, Realty & Verticals, a commercial property agency, “MGF’s focus is on real estate and the credit goes to Shravan.” Another close aide feels that Shravan “is a visionary with strong viewpoints, and his focus is the development of infrastructure.” Take the case of how MGF ventured into malls. Its primary focus is in the high-growth NCR region.

Moreover, it has tried to be at the high end. MGF’s malls are planned, situated only at prime locations, and have shops of leading brands like is the case with Delhi’s ‘MGF Metropolitan’. “All our projects are undertaken only after extensive market research,” remarks Shravan. This strategy enabled MGF to dispel any possible question marks. Agrees Kannav, “The growing mall culture is certainly maddening, however, the sustainability of many players is questionable.” True, for future development will be demand-led, and the second-rate malls will die their unnatural deaths.

An edupreneur at heart, Shravan is of the view that the immediate need of the society is higher and quality education for the coming generation. That’s the impetus for his next big venture, he has rolled out a plan to open 100 schools across India. It will lead to a balanced portfolio of businesses. Explains P. Banerjee, an equity analyst, “He is aware of the benefits of a diversified portfolio; there is no dearth of funds and diversifying into education will help enhance MGF’s brand image and credibility.”

However, the biggest challenge for Shravan is staring him in the face. In 2007, several real estate players raised funds from the capital markets and even gave handsome returns to investors. Agrees Sunil Rao, Analyst, Arihant Capital Markets, “The general trend was of real estate and infrastructure; considering the development spree and the performance of companies in implementing their order books positions. DLF was a huge success, and many real estate IPOs have been slated for 2008.”

One of them will be Emaar MGF’s, which is estimated to raise $1.7 billion and is slated to be the second-largest IPO in the sector. Asserts Shravan, “The IPO is only the first step in a long journey.” Company sources contend that while part of the proceeds will be used to construct hospitality verticals, malls and IT parks, another chunk will go towards repaying debt, and the balance for land acquisition. Comments P. Venkatesh, analyst, P. N. Vijayan, “Ever since the tie-up with Emaar, MGF has taken great strides, and its IPO will be sought after as they are long term players.”

In the next few years, Shravan hopes to develop integrated townships of global standards. Says Sanjay Kumar, Quebrex, a commercial property agency, “He is leading the business in the right direction and all projects have been highly successful.” Echoes Ahuja, “A lot of innovative thought and human perspective has been put in and, in the last two years, the ripple effect has been great.”

This is even reflected in the manner in which former employees talk about Shravan. “He is employee-friendly and has no airs about himself. We looked up to him for advice and the experience of working with MGF was a great learning process,” says one of them. “The working culture has changed, employees have become more responsive, and customer service has become great,” is how another one describes the management style of Emaar MGF.

But there are risk factors in the offing for realtors. The property market can crash. Any policy changes can wreck havoc with plans. But as Shravan leads MGF to newer paths, he can probably make a New India happen soon.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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