Look beyond Tata and Infosys
Beyond the usual handful of companies, India lacks business houses that shareholders, potential employees and corporate watchers can look up to with any great admiration
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The shockers coming out of boardrooms at the Tata group first and Infosys Ltd now, remind us that even the mighty have feet of clay. But they should also point us to our own vulnerabilities. We are shocked to learn that the country’s most respected business house and its most admired software services company are both afflicted by the same frailties as any other Indian company; the shock is amplified because we placed them on a pedestal. After all, they were like no other.
But there is a bigger problem. There are no others like them either. We obsess about what Infosys chief executive officer Vishal Sikka is doing or what Ratan Tata was saying, because we admired their companies and now feel a sense of disappointment. Yet, for all that, they remain rare oasis in the vast desert that is India’s corporate universe. Over the years, despite boasting the highest number of listings on a single stock exchange (BSE), we have not produced more than a handful of companies that shareholders, potential employees and corporate watchers can look up to with any great admiration.
Of the 5,500 listed companies on the BSE, just 100 stocks account for nearly 75% of the trading. Most others are duds, just filling in the numbers. In May last year, Mint reported that the capital market regulator Securities and Exchange Board of India (Sebi) intended to reduce the number of listed companies to curb the risk of price manipulation through entities that are not actively traded.
The numbers mentioned were scary—1,200 companies have been suspended from trading for seven years for non-compliance with rules. That’s apart from those that have just stopped reporting and are declared as vanishing companies.
Post-liberalization, the 1990s was a period of great expectation as companies like Ranbaxy Laboratories Ltd, Samtel Colour Ltd and Arvind Mills Ltd held out the promise of creating a new set of corporate stars. Of these, Ranbaxy fizzled out amid allegations of unsavoury operations fuelled by the avarice of the executives in charge (it was bought by Dai-Ichi Sankyo Co. Ltd of Japan, which then sold it to Sun Pharmaceutical Industries Ltd) while Samtel, despite being in the promising business of colour picture tubes, couldn’t cope with the rapid changes in technology worldwide.
Arvind’s dynamic chairman Sanjay Lalbhai put together a team of excellent leaders cherry-picked from among top-drawer companies like Hindustan Unilever Ltd and persuaded them to come to sleepy Ahmedabad to build a world class denim manufacturing company. Despite becoming the third largest manufacturer of denim in the world with large, discerning customers like Levi Strauss, Tommy Hilfiger, Gap and Old Navy, Arvind lost steam when denim became a commodity and world prices crashed.
It is telling that despite being part of a once-a-millennium opportunity, not one Indian company that is a part of the digital revolution, has earned our respect. By contrast, Alphabet Inc. and Amazon.com Inc., two of the three most admired companies in the world as per Fortune’s annual ranking, did not exist when Infosys began business in 1981. The third, Apple Inc., had been born just five years before that. Indeed, the top 20 list is peppered with names like Facebook Inc. and Netflix Inc., that didn’t exist in the 20th century. In a similar list for India, there’s not a single one that was born after 2000 and the youngest, Tata Consultancy Services Ltd, is almost 48 years old.
Sadly, India’s tech education system did create an environment which has produced world class CEOs who head global corporations like Google Inc. and Microsoft Corp. Yet, over 30 years after the industry took its first baby steps, the same culture hasn’t produced a single company that can rival either of these giants. All the hand wringing over the developments at Infosys masks the fact that what Sikka might be trying to achieve is some kind of high-performance, high-reward culture that incentivizes high performers like Sundar Pichai and Satya Nadella to work their way up the top of the ladder at Google and Microsoft.
Indian salaries lag behind those not just in the US, but also the largest Chinese companies. Willis Towers Watson’s 2015/2016 Global 50 Remuneration Planning Report concluded that at top management levels, executive pay in China is nearly 64% more than in India.
What are the parameters around which a company’s reputation is built? Innovation, management quality, financial soundness, long-term value creation, product quality and global competitiveness, are clearly some of them. Sadly, there are very few companies in India that have successfully managed to consistently excel on all or most of these. The few that have, and Infosys is certainly in that list, must therefore safeguard their glass house zealously.
Sundeep Khanna is a consulting editor at Mint and oversees the newsroom’s corporate coverage. The Corporate Outsider will look at current issues and trends in the corporate sector every week.
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