Feudal attitudes lie at the heart of fiascos like IL&FS
The debacles at ICICI Bank, Fortis Healthcare and now IL&FS points to a deeper malaise that perhaps has roots in the Indian joint family system
Independent directors, top executives and boards have rightly been pilloried for being asleep on the job while companies such as Infrastructure Leasing and Financial Services (IL&FS), ICICI Bank Ltd and Fortis Healthcare Ltd were haemorrhaging. But what about executives down the line, the young MBAs and chartered accountants, trained to spot such financial mismatches. Where indeed were the boys and the girls who could have said the emperor is naked?
Sadly, though we know that there are upright young men and women with the financial acumen to see that the numbers were going horribly wrong, no one ever asked them for their opinion.
Across the hallways of Indian businesses lie the vestiges of a feudal culture you would have thought had disappeared with the privy purse in 1971. Private bathrooms, dining rooms, and elevators in offices are only some visible markers. While open offices are being embraced as the new corporate mantra, the head honchos still occupy vast, cavernous rooms, often even entire floors. It is a deliberate effort to separate the bosses from the rest.
There are honourable exceptions, of course. Old-timers at Bombay House still remember with affection Ratan Tata holding the lift doors for employees. The late B.M. Munjal’s austere office in Delhi in the 1990s and his old-world courtesy of pouring out the tea for an employee who had come to meet him are equally rare instances of company owners not losing perspective of who they were.
But in general, the boss in India is an object of reverence. He is invincible and his wish is the command of the thousands who work for him and naysayers are not encouraged.
It is in the servility that is expected of employees that this feudal attitude best manifests itself. It isn’t uncommon in many of the largest Indian companies for employees to melt away at the mere sight of the chairman. In public, their arrival for an event becomes akin to a state visit by a head of state, what with first the bouncers coming in to check out the security details followed by the ubiquitous teams of flacks staking out the venue to ensure best visibility for their client in terms of television coverage, proximity to other VIPs and the pecking order of seating.
Maybe it is a part of our upbringing. For centuries, the Indian joint family system has been based on an extreme sense of deference. Questioning the family patriarch, or the other seniors, just isn’t done. Given that 70% of Indian industry is family-owned, it is quite natural that this same mindset extends to businesses.
What’s worse, it snakes its way quite insidiously into every rung of the corporate structure. Watch office meetings where there is a strict feudal order of seating with the boss of the moment sitting imperially at the head of the table as the minions gather around him or her.
How does all this matter. The overt deference, the boss is always right world view comes at a huge cost to the stakeholders. Vijay Mallya blew billions of dollars and destroyed a flourishing liquor business because there was no one to tell him that he didn’t have a clue about the airline business and the son whose birthday gift was Kingfisher Airlines didn’t have a clue about any business.
The debacles at ICICI Bank, Fortis and now IL&FS came as a shock to us because they were sudden and unexpected. Many of the independent directors on the boards of these companies have claimed that they simply did not know the extent of their financial woes. For that their disclosure norms and their openness to shareholders and regulators have rightly been questioned. But it would be wrong to believe that a company can be transparent to its shareholders, while being opaque with its employees.
A 2009 Harvard Business Review piece, ‘A Culture of Candor’ by James O’Toole and Warren Bennis, says: “When a team of senior managers suffer from collective denial and self-deception—when they can’t unearth and question their shared assumptions—they can’t innovate or make course corrections effectively. That often leads to business and ethical disasters.” You can see the whole of the IL&FS tragedy played out in these 40 words.
Sundeep Khanna is a consulting editor at Mint and oversees the newsroom’s corporate coverage. The Corporate Outsider looks at current issues and trends in the corporate sector every week.
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