Sunday, October 30, 2016

Indian private sector not an angel, it does not enjoy robotic perfection

A file picture of Ratan Tata and Cyrus Mistry with Prime Minister Narendra Modi after Mistry took over as group chairman of Tata Sons. (Courtesy: The Hindu)

There can be as many glitches, feuds, turf wars in private sector companies as there are in public sector ones. The myth that private sector companies run smoothly, on the rails of rules, has been propounded by many of us, who were irritated and angry with the public sector in India. We were infatuated with the private sector which we thought worked on the basis of a meritocratic system. But you cannot remain starry-eyed for too long. We should have known that it is people who run private companies as much as the public sector, and therefore they cannot behave radically different in one or the other. We also believed that there are no inefficiencies and no corruption in the private sector.
One of the issues ignored by the media and by the opposition parties, including the Bharatiya Janata Party (BJP), was to gloss over the role of the private sector corporations in the bribery scandals of spectrum allocation or that of the coal blocks during the tenure of United Progressive Alliance (UPA) in its second time in office. The Congress and its allies which were in power were targeted and rightly so, but everyone, the opposition as well as the media, turned a blind eye to the sins of private sector players, many of whom were only too willing to bribe the politicians to get their out-of-turn favours.
This could be seen even in the oil-for-food scam in Iraq uncovered by the Paul Volcker committee in 2005, and then minister for external affairs Natwar Singh was hounded and hooted for writing letters to then Iraq president Saddam Hussein for favours for his son and his associates. But the righteous indignation of the media did not go beyond Singh. As a matter of fact, it was the private companies-turned-buccaneers that exploited the United Nations managed sanctions system against Iraq.
So, when the boardroom shenanigans of Tata Sons, where group chairman Cyrus Mistry was guillotined without prior warning and predecessor, Ratan Tata, who had stepped down and who was responsible in zeroing in on Mistry, is brought back with the caveat that there would be a new search team to find out a new group chairman. And Tata promptly informed Prime Minister Narendra Modi about the goings-on and the future plan of action.
Mistry hit back with a quietly angry email to the board members, telling them that they took part in a shameful act. He had also argued his case against his predecessor and laid bare the wrong turns and wrong decisions that were made with regard to Nano, with the joint venture with Singapore Airlines and in the new venture of Air Asia, decisions which were presented to him as fait accompli. The Ratan Tata-Cyrus Mistry clash would make for great theatre if someone has the imagination to turn it into a play, with the Tata Sons boardroom members standing as a Greek chorus in a part of the stage.
Apart from the potential of this being turned into good theatre, there is the compelling need for the media to introspect. The Tatas have over the years projected an image that they follow processes and that they keep their hands clean in all their transactions. When the Tatas refused to surrender the land which they had been allotted for the Nano factory in Singur after they were forced to shift the project to Gujarat, no eyebrows were raised and no questions were asked. The reputation of the Tatas with their rule-based corporate culture blinded media from asking any questions which they would have readily asked of lesser mortals in the private sector and in the political dress circle. Compare this with media outrage when it came to light that Hindi film actress and BJP vice-president Hema Malini was given land for a dance institute in Mumbai at a concessional price.
Ratan Tata himself gave clear hints of the Pharisaic righteousness in a high-profile television interview with former editor of The Indian Express, Shekhar Gupta, that the Tatas did not cosy up to politicians and that is not their way of doing things. When they chose Neera Radia and her PR agency to represent them, the Tatas remained silent, and there were murmurs in the media that the intercepted private telephone conversations between Ratan Tata and Radia should not have been made public because they did not pertain to any public matter of importance.
Mistry's email shows up that Ratan Tata did not always play it straight, and the accusation is not emerging from his business rivals but from the man who he had picked up and then discarded. It will be said that Mistry's revelations are motivated because he is speaking out after he has been sacked. That is a fair point but it would not invalidate the truth of the issues he has raised. Here are the observations of an insider who was in the know more than anyone else in the set up.
There is no need to put the Tatas on the rack for their clumsy business culture which was not really as sagacious as they made it out to be. If Mistry was tactless in getting rid of the Tata’s British steel because of the continuous losses, it has to be asked whether Ratan Tata was right in acquiring the Anglo-Dutch Corus at a higher price to outwit the Brazil steelmaker CSN’s bid. It is true that Ratan Tata spread the international footprint of India's blue-blooded conglomerate, but there certainly arose the need to review it, and even reverse the decision.
It is for the Tata honchos to sort out the issues among themselves about what was wrong and what right. But the general inference that is to be drawn for the media and the naive advocate of free market who believe that privatisation is the panacea for all of India's economic challenges and ills, is that private sector in no angel and it does not enjoy robotic perfection. The Tatas' boardroom coup de grace is a sober reminder that India's private sector companies have their own demons to fight. It does not mean that the private sector is doomed. It is just that the private sector is not immune and that all its decisions are not always right. This should provide a sober criterion when criticising the performance of either a public or a private sector company.

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