Showing posts with label CEO. Show all posts
Showing posts with label CEO. Show all posts

Monday, September 10, 2012

Activism or Funda-Mentalism?

Blind and fanatical belief in ‘ISMS’, Apart from sheer greed has become the hallmark of activism and ngos in India. hating India is a Democratic right; but not at a cost to India

Allow me to put things in perspective right away. Most of you are painfully aware of the following facts: about 1.5 million Indians die of malaria every year; more than 1.5 million Indians succumb to TB every year and more than 2 million young children are killed every year by diarrhoea and related stomach disorders. I have absolutely no doubt that all right-thinking Indians often feel ashamed by these appalling numbers and the heartbreaking human misery that is hidden behind the statistics. And yet, India is awash with activists and NGOs who keep trumpeting from every available rooftop that AIDS is a kind of Biblical scourge that is devouring India. So persistent, so loud and so powerful are the voices of these activists and NGOs that many Indians think AIDS is one of the biggest killer diseases to stalk India. But how many unfortunate Indians are actually killed by AIDS? Not even one for every Indian that dies of malaria, TB or diarrhoea. Common sense demands: then why ignore TB and malaria and create such a hoopla about AIDS?

You guessed it. It just so happens that a certain corporate baron and philanthropist called Bill Gates and his wife Melinda Gates have been donating hundreds of millions of dollars for tackling AIDS in Third World countries. Yes, they do donate equally well to address some other health issues too, but the very word of AIDS conjures up magic that opens doors to vast donations, funds and incredible opportunities to travel around the world and schmooze with assorted do-gooders. So it is AIDS that everyone talks about – including page 3 people. Try talking and arguing with these activists about why we should be paying more attention to malaria and TB. The best response you will get is a derisive snort while the more ideologically evolved activists will accuse you of being a reactionary, a Neanderthal, a feudal and worse. Forget the jargon, AIDS is sexy. Who cares about TB and malaria?

Don’t you think that just about sums up the state of activism in India?

Let me make a few points here. First: no one with common sense will deny that AIDS is a serious problem. Second, the unfortunate fact is that TB and malaria are bigger problems. Third, anyone who denies this has a serious problem of misplaced priorities. If you are a CEO running a company or even senior manager running a division, you will know that priorities are critical. That’s what students of basic economics are taught: priorities determine the balance between unlimited needs and limited resources. That is what a good politician learns very quickly: how to prioritise the numerous – and often conflicting – demands. That is how societies, nation states and civilisations have evolved: by learning to prioritise and then trying to balance the conflicting priorities.

There will always be a conflict between security and human rights. Both are very important for a young democracy like India. There will always be a conflict between industrialisation and environment. Both are very important for sustainable growth of the Indian economy. There will always be a conflict between infrastructure projects and the people whose lives the projects will disrupt. Both matter. There will always be a conflict between new technologies like GM in agriculture and the preservation of existing pool of seeds and know-how. Both matter. There will always be a conflict between globalisation and the threat it poses to local communities and livelihoods. The real challenge is to nurture both.


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
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Thursday, August 23, 2012

A WHOLE NEW AGE OF CORPORATE DHARMA

BE IT LEE SCOTT, RICHARD PARSONS, AKIO TOYODA OR HOWARD SCHULTZ, CEOS OF THE WORLD TODAY CAN ONLY IGNORE STAKE HOLDER ACTIVISM AT THEIR OWN PERIL

It started as a movement and soon became an industry. Today the activism ‘industry’ is composed of individuals and organisations that, in fact, make a living from activism. In the middle of all this, organisations consistently face the heat whenever they make a wrong move; be it deliberately or otherwise. Larry Ellison, CEO, Oracle, once famously said, “A corporation’s primary goal is to make money. The government’s primary role is to take a big chunk of that money and give it to others.” But with the rise in activism globally, the expectations and calls for accountability by organisations have clearly grown. B&E takes a look at some of the prominent stakeholder groups globally that keep the activism torch burning bright.

Shareholder Activism: Boon or Bane

In this unquestionable era of globalisation, shareholder activism undoubtedly has a huge impact. These activists are strategically and operationally involved in the companies where they have vested financial interest. Managements of large corporations are severely constrained with their decision making on even short-term (and at times, day-to-day) operations when these activists enter the game. An activist investor may only need to secure a 10-15% ownership stake in large companies in order to place a disproportionate amount of pressure on management, especially considering the average attendance in shareholder meetings. Shareholder activism has been subject to a lot of criticism and a number of cases have been in the global limelight. In 2006, renowned shareholder activist Carl Icahn led a group that called for the breakup of Time Warner into four different companies, cost-cutting efforts and stock buyback worth $20 billion. Eventually the group won concessions, including the $20 billion stock buyback, $1 billion in cost-cutting measures and the appointment of a new board of directors. In another case where Carl Icahn was involved, Genzyme, the world’s biggest maker of enzyme drugs for genetic diseases was last year, was forced to close down production because of alleged manufacturing plant contamination. During the fourth quarter, Carl Icahn owned Icahn Capital LP more than doubled its Genzyme stake to 4.8 million shares, when they started dropping due to the factory problems.

A research conducted in 2008 by the Ohio University documents a 59% success rate for Carl Icahn with respect to achieving his stated goals in his target firms. In an article published by the Wall Street Journal titled ‘Why Carl Icahn is bad for investors’, Prof. Lynn Stout says, “Shareholder activists that corporate boards fear most today are hedge funds like Mr. Icahn’s: unregulated pools of wealthy investors who take large positions in a few select companies, use their ownership position to pressure boards into strategies they claim unlock ‘shareholder value,’ and then dump their stock as soon as the price rises.” He also confirms that a common goal of an activist campaign is to see to it that the target company is sold off to a private equity firm. This also leads to fewer good public companies to invest in for shareholders. Shareholder activism can at times be also healthy. A report published by IPREO in 2007 on shareholder activists shows that 50% of investors who participated in the survey believe that activism is helpful depending on the situation. In cases where the activist’s intent is right, they should work together towards a win-win situation.

Blog and Consumer Activism

Evelyn Murphy, who was the Lieutenant Governor of Massachusetts from 1987 to 1991, once quoted “Corporations will keep doing things the way they’ve always been done, unless they face ongoing public scrutiny, or a real threat to their reputation and self-respect.” Globally, ethical consumerism is a market on its own, and has been growing at 14% per annum. The latest edition of the Ethical Purchasing Index values this market at around $34 billion. Consumer activism is a very old phenomenon, as old as the origins of the word ‘boycott’ in Victorian Ireland. Such movements are known to spread geographically from an epicentre. And this epicentre is now increasingly moving online. The internet has taken consumer activism to new dimensions as information can be exchanged from anywhere. According to China Internet Network Information Center, China will overtake US in terms of Internet users in another five years. Similar is the case with other developing nations around the world where disposable incomes and internet penetration are on the rise. The latest example of backlash against a giant corporate house from the public is Starbucks. Banking on the boom in coffee houses, Starbucks became the undisputed leader. Due to corporate clout and deep resources it was able to overthrow many mom and pop coffee start ups that tried to make their presence felt. But in Kansas city, Starbucks is facing some heavy competition; simply because coffee lovers are now supporting the once struggling coffee start ups. It so happens that whenever there is a coffee shop that seems to be doing good business, it either is acquired by Starbucks or a fresh Starbucks outlet pops up in the vicinity. Starbucks says that it has no such strategy but some evidence does exist to indicate that this happens. This pattern is attested by the Specialty Coffee Association of America. Allegations that it does not pay coffee farmers adequately are also affecting brand equity.


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Saturday, July 28, 2012

@Townhall – Road to term II

@Townhall is a Novel Obama initiative that deserves to be emulated by Global Leaders for greater transparency and reach

“When we sacrifice our commitment to education, we’re sacrificing our future. We can’t let that happen. Our kids deserve better,” tweeted President Barack Obama. @Townhall may seem just another twitter account to most readers but clearly, it’s much more. @townhall is the “official account for Twitter hosted town halls.” In other words, the forum which political heads can employ to directly engage their electorate. And the first politician to take up this opportunity? Barack Obama but of course, who, on July 6, 2011, invited and answered varied questions from mostly American audiences, and that too live.

This initiative of reaching out is not only novel and historical but also redefines the concept of “democracy.” Of course, the launch of such an interface is accurately in sync with the initial 2012 election campaign plans of Obama – so one might suspect that Twitter is clearly aligning with the Democrats. But giving them the benefit of doubt, the fact is that till date, it has only been Obama who has been so proactive amongst almost all global leaders in directly engaging his citizens. Another of his team’s initiatives, the WhiteHouse 2.0 campaign that was started two years ago, also talks about a similar initiative wherein all significant social networking sites are used as tools to reach bigger audiences.

When Obama reportedly met CEOs of Twitter (May 2011) and Facebook (April, 2011), it was evidently to plan the future of his online campaign, which now seems be gaining a larger than imaginable proportion. Heads of State around the world, and even those planning to be Obama’s opponents in the coming Presidential elections, need to at least learn these few lessons from Obama, as merely opening a Twitter or Facebook account does not really further one’s cause.


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Friday, July 20, 2012

Accept or Reject without a Reason

The Term “Accept or Reject without a Reason” Is The most Misused term across Government contracts – and for Shamefully Corrupt Purposes

Without even one iota of doubt, there is an urgent need for the government or the judiciary to pass strictures against this clause and ensure that the power to accept or reject contracts is via transparent means and not through unilaterally decided arbitrary decisions that cannot even be questioned at a later date. Just look at the putrefied list of our gloriously corrupt government representatives and you start understanding why this clause has become a debauched, unethical entity.

AICTE’s Chairman R. A. Yadav was suspended in 2009 under a corruption case, while AICTE member secretary K. Naryan Rao was even arrested. In the same year, former Jharkhand chief minister Madhu Koda was arrested in a case of disproportionate assets. Ramachandran Nair, CEO, LIC Housing Finance was arrested in 2010, again on charges of bribery charges. A. K. Srivastava, CMD, Nalco was arrested in February 2011, of course, on bribery charges. Secretary General of CWG organising committee Lalit Bhanot, former telecom minister A. Raja, and more, the list simply does not seem to stop.

Our proposed solution to resolve corruption by getting rid of the clause, obviously sounds too simplistic by itself. But wonderfully, the most complicated problems in the world have had quite simple solutions. With the government running away from owning up to the issue, it’s obviously the judiciary that has to get working. Well, we guess even the judiciary has to clean up its house first of all. The Tis Hazari Courts, in their tender for purchasing aerosol insecticide, writes, “The Purchase Committee reserves the right to accept or reject any tender without assigning any reason whatsoever.” Way to go judiciary, way to go!


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Saturday, July 14, 2012

Responsible leaders are by design, not destiny

Leaders have to give the employees confidence that they will always be there for them under any circumstance provided they perform with complete dedication. Responsible leaders have to also look at comprehnsive stakeholder engagement and look to give back to society

The business environment can continue to evolve from one cycle to the next, new technologies can relentlessly enter into the market to replace the old and business curriculum as well as the management thought process may be upgraded several times over to keep pace with the times. But the essence of great leadership, to my mind, would remain more or less the same.

And great leadership starts with the realisation that while you can potentially achieve outstanding results if you are able to provide your business the leverage of having the best of technologies and processes in your industry on the day, but it would all prove really futile and in vain if you cannot have employees with the right mindset. In my experiences at Tata Steel, I realised that a critical part of this mindset has to be the ability to stay out of any comfort zone.

When we abandoned the cradle to grave culture in Tata Steel, it was a difficult process of transition, but it was identified as an unavoidable necessity. Managing a company through crisis can be compared to treating a patient in an Intensive Care Unit (ICU). The patient may have to go through numerous painful medical treatments and tests, and similarly, an organisation may have to go through a period of painful transition if it has to make that spectacular turnaround. Such a turnaround is incomplete without the will and the passion of the people involved. If people realise that they have to win their own battles and that no one is indispensable in a company, they are the right kind of people to deliver on your objectives. Creating a sense of ownership and responsibility across the organisation is the key to hold your own and grow in today’s highly competitive environment. Once people realise that they are mutually dependent for their individual good, they will prove to be highly productive.

Having said that, our endeavour at Tata Steel was not about giving up on the traditional philosophies on employee management altogether. Motivated people without the right sense of direction at the top would be certainly setting themselves up for failure. They are akin to poles that are all randomly oriented in an un-magnetized iron rod. But when it is subjected to a magnetic field, they (the poles) all get aligned in the same direction due to the process of magnetisation.

A leader has to play the part of the coil carrying the current so that the entire team gets aligned. The role of a leader is to inspire and lead them for the larger good of their organisation, and ultimately their own as well. A true leader never gives up on personal touch. He has to constantly communicate with his people, be an integral part of their lives and also ensure that they always feel that he is there to stand for them through thick and thin, as long as they are doing their job with complete dedication. Leaders who prefer to stay in the cool comfort of their cabins are not really leaders. In a similar vein, leaders who have expectations from their followers that they themselves cannot meet will not go very far. And that eventuality would be by design rather than by destiny.

In addition, the CEO is the best advocate for the company in the outside world. It is very important for him to communicate with all the stakeholders outside the company on a continuous basis and ensure that the business has a thriving ecosystem, besides looking for growth opportunities as well as potential threats in the task as well as the broad environment. And if he manages that, his subordinates will automatically follow his lead. Communication is like the life blood of an organisation, and if a leader falters on that critical front, his ‘magnetic’ force will remain largely ineffective and lude him.

Of course, the manner in which people express themselves as leaders has a lot to do with their individual character traits. But all leaders have to be prepared to accept that people under them are also individuals in their own right and can often have differing views. Consensus is a valuable thing to have in theory; but in the real corporate world, it would be inane to expect too much of it. Harsh decisions can often lead to acrimony within the ranks, but it is a leader’s privilege, as well as his prerogative and responsibility to take such decisions whenever required, rather than putting them off for want of a more democratic solution. Some of the dissenters will fall in line ultimately, and you have to look at ways to ensure that the rest of them are unable to do any damage. If your employees trust you implicitly, these issues will hardly crop up. Therefore, it is also extremely important to maintain your credibility in the organisation and go by your very last word. There is also a significant amount of skepticism and cynicism in the organisations of today.

Without removing the trust deficit that exists in your followers, you cannot build or even, for that matter, sustain a great organisation. Remember that if you do not have people to stand up for you in difficult times, there can be no greater failing for you as a leader. The delicate part of credibility is that it can take years to build, but it can be destroyed in an instant. The Tata corporation has thrived in letter and spirit with its motto, “Leadership with trust”, and this is why the group remains an iconic benchmark for India today.


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Saturday, July 07, 2012

Second time lucky but determined not to lose first spot again

When GM went broke four years ago not many gave it a chance to spring up a fight and come back from financial rehab. Those Cassandras are now eating their words as the former lumbering auto giant strikes back with a vengeance.When GM went broke four years ago not many gave it a chance to spring up a fight and come back from financial rehab. Those Cassandras are now eating their words as the former lumbering auto giant strikes back with a vengeance.

A lot has changed for General Motors (GM) since it went adrift in rough seas that threatened to dash its corporate ship against dangerous waves just four years ago. In the summer of 2008, about a year before GM became a ward of the state, its chief executive Rick Wagoner was desperate to catch at straws in a futile bid to avert his company from going belly up. The financial results for the 2008 spring quarter left no one in doubt about GM’s bleak prospects: a $15.5 billion loss, its third worst in a century. GM’s revenue in North America had fallen $10 billion — a breathtaking 33% — from the year-earlier quarter. And for the first time, after donning the mantle of being the No. 1 car maker in the world from Ford in 1931, GM lost that coveted position to Toyota. In the midst of a significant downturn in the American and global economy, Toyota raced ahead of GM in global car sales, selling about 620,000 more vehicles in 2008 than GM’s 8.35 million.

But the worst was yet to come. Finding itself at the end of financial tether, Wagoner flew into Washington D.C., cap in hand, to ask for $10-12 billion of easy loans from the Federal government to bail out his cash-strapped company. But his demeanour - flying in a private luxurious jet at the company’s expense - rubbed many in Washington the wrong way. Sensing that GM was fast on its way to go kaput, the Obama administration had the good sense to push through some painful but imperative decisions. In quick time Wagoner was booted out and the doddering company was offered a lifeline in the form of government bailout funds after being put under bankruptcy court protection. GM - which hadn’t made a profit since 2004 - declared in its filing that it had $172 billion in debt and $82 billion in assets. Its market capitalisation, having plumbed the depths of investor confidence, stood at $2.21 billion in March 2009 when Wagoner departed. The value of GM stocks had cratered to $3.62 as against the trading levels of above $70 when Wagoner had joined as CEO in June of 2000.

Wagoner’s exit did not exactly move GM away from over the hump. Through the initial months of restructuring, the company became a revolving door for a succession of CEOs who drifted in and out without leaving any mark or making an impression. It was only after Daniel Akerson - GM’s fourth CEO in just under 18 months - arrived in September 2010 that the company once again rediscovered it automotive mojo and competitive gene. Since then the automaker, which had lost about $100 billion in the years before its 2009 bankruptcy, has been consistently profitable. In the latest quarter (Sept-Dec. 2011) for which results are available, GM made about $1.7 billion in profit, besides having already repaid $24.1 billion of the $49.5 billion in federal government aid it had received. But the biggest icing on the cake was that GM’s worldwide sales rose 7.6% to 9 million vehicles in 2011, helping the auto major to once again grab pole position as the world’s No. 1 car seller (a position it had ceded to Toyota in 2008). That’s surely a remarkable achievement for a carmaker that looked completely down in the dumps until two years ago.

The uptick in sales came about on the back of the strong showing by its flagship Chevrolet brand, which sold a record 4.8 million vehicles last year (even more than total sales of brands like Nissan and Honda). European carmaker Volkswagen was the second-largest seller of vehicles worldwide whose sales rose 14.3% to 8.2 million vehicles followed by the likes of Toyota, which expects its 2011 sales to come in at around 7.9 million vehicles, down about 6% from 2010. Analysts attribute GM’s recent swell performance to its strong US and China operations. Being the two biggest markets for carmakers today, GM has done well to wedge the China market open in its favour by collaborating with its local partner (SAIC Motor Corp), a strategy that has paid off handsomely. In 2011, GM sold more than 2.5 million vehicles in China, registering an 8.3% increase from the previous year. In its North American home market, GM clocked sales of over 2.5 million vehicles at a 13% growth trajectory last year.

According to Jeremy Anwyl, Vice Chairman of Edmunds, an automobile industry information website, GM was lucky to have come out of its bankruptcy and consequential restructuring at a time when global market conditions were once again turning favourable for the automobile industry. “The bankruptcy allowed GM to cut costs and fundamentally restructure its operations from a cost and incentives perspective. GM came into a growing market with a lean inventory and, at the same time, it introduced impressive new products such as the Chevy Cruze.” What also helped GM pip Toyota to the post was the fact that the Japanese car maker could not exploit the tailwind of growth and the resurgence in the global car market as it was badly kneecapped by supply-chain and production glitches at its plants, arising due to the double whammy of the tsunami and earthquake that struck Japan early last year.

But despite making the most of the opportunities in the past year, the real test of GM’s ability will be to consolidate and expand its market share without diluting its profitability. With Japanese car makers like Toyota and Honda emerging from the shadow of last year’s contretemps and players like Volkswagen and Ford stepping up on the throttle, can GM continue its alpha dog run in the industry? Already, Toyota has come out with its sales forecast of 8.48 million units for the current year, Volkswagen is pulling out all the stops to top the industry league tables by 2018 and Ford is on track taking its One Ford strategy to the next phase that might give it a fair shot at becoming market leader. In other words, GM is up against the most competitive automobile market in its history and its ability to continue delivering stellar results is bound to come under increasing strain. “Ford, VW and Hyundai are some of the toughest players there are and they lead by dint of their product line-ups. GM has to push harder to get ahead of the curve to compete head to head with these companies in all market segments globally,” says Laurie Harbour, President, Harbour Results, an industry analyst.
         
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Source : IIPM Editorial, 2012.

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

For More IIPM Info, Visit below mentioned IIPM articles.

IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age WomanIIPM's Management Consulting Arm-Planman Consulting
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