This week, six of the seven private airline in India have called for a one day no fly day on August 18th 2009. The reason: to protest against the high cost of aviation fuel and high airport tax, which they sight as the main reasons why they lost about Rs 10000 crores ($2 billion) last year. They want the government to bail them out.
1. Granted that the government of India is spending Rs 15000 crore ($3 billion) to bailout the government run Air India and Indian Airlines (Which I see as throwing good money after the bad), but should this bailout package be extended to the entire aviation industry?
2. Have the airlines which saw double digit growth in passenger volumes expanded way beyond their means to sustain themselves in this recessionary environment? Can the airlines survive by increasing their prices or by cutting their fleet strength?
3. What about the infrastructure like airports? Have they kept pace with the growth of the industry? If not should the government also share the blame for the current crisis?
4. Should the government spend money on bailing out the airlines and risk not having enough money to build the necessary infrastructure; or should the government spend money on modernizing the infrastructre and let the markets take care of the airlines and risk loosing lot of airline traffic due to closure and consolidation of the various airlines?
Showing posts with label Corporate Governance. Show all posts
Showing posts with label Corporate Governance. Show all posts
Saturday, August 1, 2009
Saturday, May 2, 2009
Corporate Responsibility Meets Social Responsibility
Real Estate prices have sky rocketed so much that the dream of owning a home by millions of low and middle income people in India has been just a dream. But if the new project being planned by some of the big names in Indian corporate, non profit and construction companies pans out, then affordable housing for these millions of people would be around the corner.
On the anvil are houses for between Rs 3 lakh and Rs 5 lakh for a constituency as diverse as domestic help, taxi drivers, plumbers, senior citizens, graduates, newly wed couples - basically, those who earn between Rs 6,500 and Rs 13,000 a month.
Janaagraha founder Ramesh Ramanathan, MphasiS founder Jaithirth Rao and CSC Constructions are some whose plans have gone beyond the drawing board. Till now, the onus was on the government to cater to the needs of the under-privileged.
Tuesday, March 17, 2009
Quote of the Day
With the outrage over the $165 million bonuses to AIG executives reaching feverish proportions, the Quote of the Days comes from Sen. Chuck Grassely of Iowa
With all due respect to the Senator from Iowa, who I am pretty sure is outraged over the whole bonus issue, saying such outrageous things does not contribute to the discussion in any meaningful way and neither does it help in solving the problem at hand.
Image obtained from Time
With all due respect to the Senator from Iowa, who I am pretty sure is outraged over the whole bonus issue, saying such outrageous things does not contribute to the discussion in any meaningful way and neither does it help in solving the problem at hand.
Image obtained from Time
Sunday, March 15, 2009
Questions I Want to Ask AIG Executives
Bonus: a sum of money granted or given to an employee in addition to regular pay, usually in appreciation for work done.
This is how Dictionary.com defines bonus. With this definition in mind, I am not sure how to react to the news about AIG executives receiving $165 Million in bonuses.
Bonus is something that you get when you perform better then expected or the company wants to share some of the profit with the employees. I understand if the bonuses were paid by companies who were profitable or companies that were rewarding their employees for their expectational performance. But,AIG which has received $170 Billion from the taxpayers to keep it afloat, rewarding bonuses to the same executives who remained blind to all the risk that the company was taking, putting not just the company but the entire US economy at risk: I fail to comprehend this.
Here are some questions that I would like to ask these AIG executives that are receiving their big bonuses today:
1. When your company reported the largest quarterly loss in corporate history of $61.7 billion in the last three months of 2008, how can you sit there and except this bonus with a straight face?
2. What are you going to do with the $165 million bonus? If you have no idea can I give some suggestions: buy a big house, a yatch, drive around in a Bentely or a Ferrari and don't ever come back again asking for bailout money.
3. When millions of hardworking people have lost their jobs, homes and life savings by the very actions that you guys took, how come you are being rewarded with $165 million and these hardworking people are left with nothing?
4. Is there no limit to your rapacious desire for more? Did you leave your moral and ethical compass at the door when you walked into AIG?
If any of you have other questions to ask the highly paid executives at AIG, please pen them.
This is how Dictionary.com defines bonus. With this definition in mind, I am not sure how to react to the news about AIG executives receiving $165 Million in bonuses.
Bonus is something that you get when you perform better then expected or the company wants to share some of the profit with the employees. I understand if the bonuses were paid by companies who were profitable or companies that were rewarding their employees for their expectational performance. But,AIG which has received $170 Billion from the taxpayers to keep it afloat, rewarding bonuses to the same executives who remained blind to all the risk that the company was taking, putting not just the company but the entire US economy at risk: I fail to comprehend this.
Here are some questions that I would like to ask these AIG executives that are receiving their big bonuses today:
1. When your company reported the largest quarterly loss in corporate history of $61.7 billion in the last three months of 2008, how can you sit there and except this bonus with a straight face?
2. What are you going to do with the $165 million bonus? If you have no idea can I give some suggestions: buy a big house, a yatch, drive around in a Bentely or a Ferrari and don't ever come back again asking for bailout money.
3. When millions of hardworking people have lost their jobs, homes and life savings by the very actions that you guys took, how come you are being rewarded with $165 million and these hardworking people are left with nothing?
4. Is there no limit to your rapacious desire for more? Did you leave your moral and ethical compass at the door when you walked into AIG?
If any of you have other questions to ask the highly paid executives at AIG, please pen them.
Sunday, March 1, 2009
Self Fullfilling Prophecy
Here is Bernard Madoff, the former chairman of the NASDAQ stock exchange, talking about how in today's regulatory environment it is virtually impossible to violate any rules. He even talks about how violation of rules cannot go undetected over a long period of time. As it turns out, time did catch up with him. He is currently under house arrest waiting to be charged for violating some of the same rules that he said were virtually impossible to violate.
If only he had applied his thinking in the video to real life, we would not be talking about Bernard Madoff and associating him with the largest investor fraud ever perpetrated.
If only he had applied his thinking in the video to real life, we would not be talking about Bernard Madoff and associating him with the largest investor fraud ever perpetrated.
Thursday, February 12, 2009
Who's to Blame for the Financial Crisis?
Not a day goes by without the news of more layoffs, dropping stock market, or dropping house values. But who are the people who precipitated this meltdown. Time compiles a list of 25 people who may have contributed to the current mess. The list includes who's who including former US and foreign leaders, high flying bankers, market regulators, and former CEO's of once invincible corporations.
Find out who these 25 people are at 25 People to Blame For
Find out who these 25 people are at 25 People to Blame For
Monday, February 9, 2009
Cow Economics
How can cows explain economics. Read below to find out
SOCIALISM
You have 2 cows.
You give one to your neighbour.
COMMUNISM
You have 2 cows.
The State takes both and gives you some milk.
FASCISM
You have 2 cows.
The State takes both and sells you some milk.
NAZISM
You have 2 cows.
The State takes both and shoots you.
BUREAUCRATISM
You have 2 cows.
The State takes both, shoots one, milks the other, and then throws the milk away…
TRADITIONAL CAPITALISM
You have two cows.
You sell one and buy a bull.
Your herd multiplies, and the economy grows.
You sell them and retire on the income.
SURREALISM
You have two giraffes.
The government requires you to take harmonica lessons
AN AMERICAN CORPORATION
You have two cows.
You sell one, and force the other to produce the milk of four cows.
Later, you hire a consultant to analyse why the cow has dropped dead.
VENTURE CAPITALISM - AN ICELANDIC CORPORATION
You have two cows.
You sell three of them to your publicly listed company, using letters of credit opened by
your brother-in-law at the bank, then execute a debt/equity swap with an associated
general offer so that you get all four cows back, with a tax exemption for five cows.
The milk rights of the six cows are transferred via an intermediary to a Cayman Island
Company secretly owned by the majority shareholder who sells the rights to all seven
cows back to your listed company. The annual report says the company owns eight cows,
with an option on one more. You sell one cow to buy a new president of the United States,
leaving you with nine cows. No balance sheet provided with the release. The public then
buys your bull.
A FRENCH CORPORATION
You have two cows.
You go on strike, organise a riot, and block the roads, because you want three cows.
A JAPANESE CORPORATION
You have two cows.
You redesign them so they are one-tenth the size of an ordinary cow and produce twenty
times the milk. You then create a clever cow cartoon image called ‘Cowkimon’ and market it worldwide.
A GERMAN CORPORATION
You have two cows.
You re-engineer them so they live for 100 years, eat once a month, and milk themselves.
AN ITALIAN CORPORATION
You have two cows, but you don’t know where they are.
You decide to have lunch.
A RUSSIAN CORPORATION
You have two cows.
You count them and learn you have five cows.
You count them again and learn you have 42 cows.
You count them again and learn you have 2 cows.
You stop counting cows and open another bottle of vodka.
A SWISS CORPORATION
You have 5000 cows. None of them belong to you.
You charge the owners for storing them.
A CHINESE CORPORATION
You have two cows.
You have 300 people milking them.
You claim that you have full employment, and high bovine productivity.
You arrest the newsman who reported the real situation.
AN INDIAN CORPORATION
You have two cows.
You worship them.
A BRITISH CORPORATION
You have two cows.
Both are mad.
AN IRAQI CORPORATION
Everyone thinks you have lots of cows.
You tell them that you have none.
No-one believes you, so they bomb you and invade your country.
You still have no cows, but at least now you are part of Democracy….
AN AUSTRALIAN CORPORATION
You have two cows.
Business seems pretty good.
You close the office and go for a few beers to celebrate.
A NEW ZEALAND CORPORATION
You have two cows.
The one on the left looks very attractive
Link obtained from Thrandur.net
SOCIALISM
You have 2 cows.
You give one to your neighbour.
COMMUNISM
You have 2 cows.
The State takes both and gives you some milk.
FASCISM
You have 2 cows.
The State takes both and sells you some milk.
NAZISM
You have 2 cows.
The State takes both and shoots you.
BUREAUCRATISM
You have 2 cows.
The State takes both, shoots one, milks the other, and then throws the milk away…
TRADITIONAL CAPITALISM
You have two cows.
You sell one and buy a bull.
Your herd multiplies, and the economy grows.
You sell them and retire on the income.
SURREALISM
You have two giraffes.
The government requires you to take harmonica lessons
AN AMERICAN CORPORATION
You have two cows.
You sell one, and force the other to produce the milk of four cows.
Later, you hire a consultant to analyse why the cow has dropped dead.
VENTURE CAPITALISM - AN ICELANDIC CORPORATION
You have two cows.
You sell three of them to your publicly listed company, using letters of credit opened by
your brother-in-law at the bank, then execute a debt/equity swap with an associated
general offer so that you get all four cows back, with a tax exemption for five cows.
The milk rights of the six cows are transferred via an intermediary to a Cayman Island
Company secretly owned by the majority shareholder who sells the rights to all seven
cows back to your listed company. The annual report says the company owns eight cows,
with an option on one more. You sell one cow to buy a new president of the United States,
leaving you with nine cows. No balance sheet provided with the release. The public then
buys your bull.
A FRENCH CORPORATION
You have two cows.
You go on strike, organise a riot, and block the roads, because you want three cows.
A JAPANESE CORPORATION
You have two cows.
You redesign them so they are one-tenth the size of an ordinary cow and produce twenty
times the milk. You then create a clever cow cartoon image called ‘Cowkimon’ and market it worldwide.
A GERMAN CORPORATION
You have two cows.
You re-engineer them so they live for 100 years, eat once a month, and milk themselves.
AN ITALIAN CORPORATION
You have two cows, but you don’t know where they are.
You decide to have lunch.
A RUSSIAN CORPORATION
You have two cows.
You count them and learn you have five cows.
You count them again and learn you have 42 cows.
You count them again and learn you have 2 cows.
You stop counting cows and open another bottle of vodka.
A SWISS CORPORATION
You have 5000 cows. None of them belong to you.
You charge the owners for storing them.
A CHINESE CORPORATION
You have two cows.
You have 300 people milking them.
You claim that you have full employment, and high bovine productivity.
You arrest the newsman who reported the real situation.
AN INDIAN CORPORATION
You have two cows.
You worship them.
A BRITISH CORPORATION
You have two cows.
Both are mad.
AN IRAQI CORPORATION
Everyone thinks you have lots of cows.
You tell them that you have none.
No-one believes you, so they bomb you and invade your country.
You still have no cows, but at least now you are part of Democracy….
AN AUSTRALIAN CORPORATION
You have two cows.
Business seems pretty good.
You close the office and go for a few beers to celebrate.
A NEW ZEALAND CORPORATION
You have two cows.
The one on the left looks very attractive
Link obtained from Thrandur.net
Saturday, January 10, 2009
Why Smart People Make Such Dumb Decisions?
Satyam Computers until last week was one of the titans of the Indian IT and Outsourcing industry. Founded in 1987 by founder and CEO, Ramalinga Raju, Satyam rose to global prominence with the outsourcing boom, claiming 140 of the Fortune 500 companies as its clients and accounting for $1 billion in yearly revenue.
As it turns out, most of the $1 billion in revenue was non existent and Satyam was infact the biggest corporate fraud in Indian history. This begs the question, why some of the smartest people in the world, who have worked so hard their entire life to be at the top of their careers, just throw it all away in one false swoop? What is it that makes them play with the lives of several thousand employees, as well as billions of dollars of investors money? And Ramalinga Raju is a recent addition to the long list or people which includes Bernard Madoff, Jeffery Skilling, Ken Lay, Bernie Ebbers, Wall street, Investment banking and Mortgage company CEO's for their role in the sub prime mortgage crisis etc..
All of us would admit that these people were some of the smartest people in the room until things unraveled around them. So what is it that leads these smart people to make some of the dumbest decisions in hindsight which ultimately led to their downfall. Is it just plain old greed? Or is it the feeling that I am the smartest person in the room, having achieved so much, whatever decision I make will be the right one's. Or is it pressure from investors and shareholders demanding continued growth, higher value and greater returns.
The answers may not be one of the other, but a combination of all a number of factors. What do you think? Please chime in with your thoughts.
As it turns out, most of the $1 billion in revenue was non existent and Satyam was infact the biggest corporate fraud in Indian history. This begs the question, why some of the smartest people in the world, who have worked so hard their entire life to be at the top of their careers, just throw it all away in one false swoop? What is it that makes them play with the lives of several thousand employees, as well as billions of dollars of investors money? And Ramalinga Raju is a recent addition to the long list or people which includes Bernard Madoff, Jeffery Skilling, Ken Lay, Bernie Ebbers, Wall street, Investment banking and Mortgage company CEO's for their role in the sub prime mortgage crisis etc..
All of us would admit that these people were some of the smartest people in the room until things unraveled around them. So what is it that leads these smart people to make some of the dumbest decisions in hindsight which ultimately led to their downfall. Is it just plain old greed? Or is it the feeling that I am the smartest person in the room, having achieved so much, whatever decision I make will be the right one's. Or is it pressure from investors and shareholders demanding continued growth, higher value and greater returns.
The answers may not be one of the other, but a combination of all a number of factors. What do you think? Please chime in with your thoughts.
Wednesday, January 7, 2009
Satyam - An Aberration or a Sign of Corporate Maleficence?
Today's admissions by Ramalinga Raju, the former CEO of Satyam Computers, to the largest corporate fraud in Indian history could not have come at a worse time for corporate India. With the world economy in a tailspin , caused by the US subprime crisis, and growth in India slowing, this crisis to one of Indian software industries titans could have devastating impact on the Indian economy.
First there is the question of jobs. With Satyam employing 53,000 people, barring any miracle, most of these people would lose their jobs. With the IT sector hit hard by the economic downturn in the United States, and the other big three IT giants (TCS, Wipro and Infosys) dealing with layoffs of their own, there is not much appetite to accommodate any of the 53,000 employees who will be laid off.
Second, there is the question of regulation, lack of oversight and independence. I find it hard to believe, no matter what Ramalinga Raju said in his letter to the board of directors and government regulators about none of the senior management and directors knowing that he was cooking the books. If Ramalinga Raju acted in this alone, then none of the BOD and senior management is fit to serve the company. But if the senior management and BOD's knew and kept the shareholders, regulators and the employees in the dark, then are as guilty as him and must face the same fate as Ramalinga Raju.
Third, there is the question of the regulators role in letting this happen. This scandal, which some are calling India's Enron, puts the focus on the whether there is enough governmental oversight and proper corporate governance in all of the publicly traded companies. If this thing can happen in what was until recently a very respected company, claiming 150 of the Fortune 500 companies as its clients, what is there to stop this from happening in any other company. Was Satyam just an aberration or is it the first domino to fall from the cupboard of corporate maleficence that may be pervasive across corporate India? Should we believe the venerable Narayana Murthy when he says that this was an isolated case and a failure of governance?
Finally, all of corporate India will be watching the authorities to see how fast they can get to the bottom of this. If there is even a hit of favouritism or corruption in how the case is handled, then the image of India as a emerging economy will suffer. If foreign and domestic investors cannot trust the authorities to do the job of safeguarding their investments and regulating a free and fair market, then investment will dry up and so will the economic engine. The boom that India has enjoyed over the last two decades will be just a blip in the radar screen.
This crisis gives India an opportunity to show the world that when it comes to free and fair markets and ethical corporate governance, India is second to none. It must show the world that no matter who the guilty person in this scandal is, they will be brought to justice. The future of India depends on it.
First there is the question of jobs. With Satyam employing 53,000 people, barring any miracle, most of these people would lose their jobs. With the IT sector hit hard by the economic downturn in the United States, and the other big three IT giants (TCS, Wipro and Infosys) dealing with layoffs of their own, there is not much appetite to accommodate any of the 53,000 employees who will be laid off.
Second, there is the question of regulation, lack of oversight and independence. I find it hard to believe, no matter what Ramalinga Raju said in his letter to the board of directors and government regulators about none of the senior management and directors knowing that he was cooking the books. If Ramalinga Raju acted in this alone, then none of the BOD and senior management is fit to serve the company. But if the senior management and BOD's knew and kept the shareholders, regulators and the employees in the dark, then are as guilty as him and must face the same fate as Ramalinga Raju.
Third, there is the question of the regulators role in letting this happen. This scandal, which some are calling India's Enron, puts the focus on the whether there is enough governmental oversight and proper corporate governance in all of the publicly traded companies. If this thing can happen in what was until recently a very respected company, claiming 150 of the Fortune 500 companies as its clients, what is there to stop this from happening in any other company. Was Satyam just an aberration or is it the first domino to fall from the cupboard of corporate maleficence that may be pervasive across corporate India? Should we believe the venerable Narayana Murthy when he says that this was an isolated case and a failure of governance?
Finally, all of corporate India will be watching the authorities to see how fast they can get to the bottom of this. If there is even a hit of favouritism or corruption in how the case is handled, then the image of India as a emerging economy will suffer. If foreign and domestic investors cannot trust the authorities to do the job of safeguarding their investments and regulating a free and fair market, then investment will dry up and so will the economic engine. The boom that India has enjoyed over the last two decades will be just a blip in the radar screen.
This crisis gives India an opportunity to show the world that when it comes to free and fair markets and ethical corporate governance, India is second to none. It must show the world that no matter who the guilty person in this scandal is, they will be brought to justice. The future of India depends on it.
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