Vol.XVI No. 01/2012
A Journal of the INSTITUTE OF DIRECTORS January 2012
Masterclass for Directors in Delhi
H.E. Supachai Panitchpakdi Secretary - General, UNCTAD inaugurating the Masterclass for Directors on 24 November, 2011 at New Delhi.
Get a replica of your favourite edition of Quality Times on our website
IOD Institute of Directors
Building Tomorrow’s Boards
GLOBAL CONVENTION 2012 7th International Conference on
SOCIAL RESPONSIBILITY 24-26 April, 2012, Dubai, UAE Theme:
CSR: A Bridge between Business & Society
SUBTHEMES AND TOPICS Ÿ Transforming your business by partnering with
the poor Ÿ Fortune at the bottom of the pyramid
Also presentation of
Ÿ Microfinancing - does it alleviate poverty? Ÿ Socially responsible investment -does it pay? Ÿ Measuring benefits of CSR Ÿ Branding with CSR and Green Agenda Ÿ Working with media to make CSR work Ÿ Power of communication -turning cynics into
Golden Peacock Awards Since 1990
Ÿ Climate change -an oppportunity for business
transformation Ÿ Making climate change work for poverty
® Registered in India
INSTITUTE OF DIRECTORS IOD House M-52 (Market), Greater Kailash Part-II New Delhi – 110048, India Board Nos. : +91-11- 41636294 , 41636717, 41008704 Email: email@example.com
Vol. XVI No.01/2012 January 2012 Editorial Board Lt Gen JS Ahluwalia, PVSM (Retd.) Pradeep Chaturvedi Manoj K. Raut Ashok Kapur, IAS (retd.) Editor Pradeep Chaturvedi Sub Editor Reji Mathew Manager Designing Pallavi Arora IOD (Head Office) M-52, Market Greater Kailash - II, New Delhi-110048 Tel: 011-41636294,41636717 Fax: 011-41008705 E-mail: firstname.lastname@example.org Website: www.iodonline.com Regional Offices Mumbai A-1 Monarch Palace, J B Nagar, Andheri (E), Mumbai - 400 059, India Ph: 022-67582230/31/32 Fax: 022-67582231 E-mail: email@example.com Bangalore S- 908, 9th Floor, Manipal Centre 47 Dickenson Road, Bangalore - 560 042 Ph: 91-80-25092234, 25581701 Fax: 25583490 firstname.lastname@example.org
Government's decision to put on hold proposal to allow Foreign Direct Investment (FDI) in multi-brand retail on hold till a consensus is reached amongst all stakeholders is being considered as a set back to government's reforms agenda. The major industry players have called it as end-of-the-road for economic reforms. However, what has gone unnoticed is that a key proposal linked to the retail reform agenda - 100% FDI in single brand retail - has possibly scraped through. The government is expected to go ahead with it since there is hardly any opposition to it. This simply means that the super market giants may not be able to set up deep discount stores in India, yet major brands like Ikea Furniture and GAP may still be able to sell just one brand under their roof and gain entry into India. Corporates are linking this set back to put in motion the chain reaction that may affect passage of Pension Fund Regulatory Bill; Bill to Increase FDI in Insurance; and allowing FDI in Civil Aviation by Foreign Airlines.
From the Editor
Key business leaders into retail business from Future Group; Bharti Enterprises and Aditya Birla Retail have indicated that such a situation has arisen because the benefits of FDI in multi-brand retailing were not properly understood by the stakeholders. But, then who is supposed to make the politicians, policy makers and other stakeholders understand the benefits of such policy action. The awareness creation (for what is termed as the advocacy) on such benefits have to be explained by the major beneficiary of government's policy action. Over the last ten years i.e. April 2000 to March 2010, about Rs.9, 300 crore FDI was received in India in cash and carry wholesale This is not a set-back for the policy but should only be treated as the lesson learnt. Subsequently, a new strategy for introduction of such reforms should be evolved through debate on public platforms, social media and professional societies. The Institute of Directors will certainly use its platforms to initiate a healthy debate on Foreign Direct Investment in various sectors that will promote and catalyse ethical business and sustainability in Indian market. IOD's 22nd World Congress on Total Quality with the theme "Total Quality - The Catalyst for Ethical Business and Sustainability" is being organized at Bangalore during 19-21 January 2012. The Congress has attracted leading corporates, government policymakers and academicians to brainstorm on the topic and evolve a strategy for growth of Indian economy in turbulent global scenario. Prestigious Golden Peacock Awards for Quality, Training and Innovation will also be presented on the occasion. Pradeep Chaturvedi
Total Pages :- 40 Institute of Directors M-52 (Market), GK-II, New Delhi-110048 INDIA. Tel. : 011-41636717, 41636294, 41008704 Fax. 011-41008705
Competition Law Justice P.N. Bhagwati Corporate Governance & Sustainability Dr. Ola Ullsten Sustainability has Become the Economic Game-Changer Christopher Gleadle Sustainability Business Ethics Lt. Gen J.S. Ahluwalia PVSM (retd.) Climate Change Conference at Durban: No Definite Outcome Pradeep Chaturvedi The Best of Times - The Worst of Times Peter L. Walker Asia Economic Notes Deepak N. Lalwani OBE Oligopiltics Markets and Collective Dominance Enrico Adriano Raffaelli News & Views
Quality Times January 2012
4 5 6 9 13 25 28 29 33
Competition Law *Justice P.N.Bhagwati scale and competitiveness. In the last two decades however, Indian companies have learnt to become competitive and effectively grow to economic sizes and in fact expand their horizons beyond the shores of India. Markets have become more competitive but there is no perfect competition and it becomes imperative to set out the rules of the game and ensure that various market players abide by the same. There is thus, a need for competition law and competition authority.
We at the IAL have always felt that Competition Law is a new branch of Jurisprudence which can be described as Economic of sociological Jurisprudence. It is not law in the conventional sense where it is an injunction to individuals to act or to refrain from acting in a particular manner, at the pain of punishment. India felt the need to move away from the erstwhile Monopolies and Restrictive Trade Practices Act for many years and finally we have now the new Competition act of 2003. Ina liberalized and a global economy where we see free movement of capital and resources having an antiquated law that was enacted in days of controls did not fit the bill and the enactment of the new act has been a very welcome development in India. With the liberalization of the Indian economy from 1991, Indian manufacturers are faced with several competitive challenges including that of uneconomic size, lack of advantages of economies of
I am sure that the competition commission has had many challenges in the last two and a half years since it has been set up dealing with several new concepts such as relevant market, appreciable adverse effect on competition in India, abuse of dominance etc. Corporate facing investigations before the Competition Commission of India equally also face insurmountable challenges of inadequacy of data, availability of competition economists and the need to grapple with the new concepts. There are few firms and lawyers who have some experience now in this specialized branch of the law and seminar and workshops such as these go a long way in building an army of competition law practitioners in the country. The law is relatively new and its interpretation and development is critical and Competition Commission has mandated with this enormous task. However, in my view, it is not only the responsibility of the competition commission but also of the practitioners of competition law to work closely with the commission in developing India's own jurisprudence in this branch of the law in line with fundamental concepts of
Quality Times January 2012
competition law which are in fact today almost universal. In today's fast growing world and constantly changing economy, the only constant is change and it becomes necessary for judges and regulators who deliver justice to be constantly in touch with global developments so that they are able to establish an Indian jurisprudence whilst keeping in mind the global development of business and law. The Competition Act has thus become a necessary tool to regulate and guide the open market should self regulation fail. The Act must intervene so that the ordinary consumer is protected against the power and influence of large Corporations. In the long term, it promotes healthy growth where on one is a loser. Extract from chairman, IAL's address at the Inaugural Ceremony of 3rd International Conference on Competition Law held on 25-26 November, 2011 at Delhi * Address of Justice P.N. Bhagwati former Chief Justice of India is founder Chairman of the International Academy of Law at the 3rd International Conference on Competition Law.
Motivation: In past eras when our motivational paradigm was pay and promotion, we built an overly layered and over paid structure. Not only were the side effects bad, but motivation wasn't so hot either. Today we need a motivational paradigm based on more fundamental motivational requirements like purpose, meaning involvement and growth.
Corporate Governance and Sustainability * Dr. Ola Ullsten The need to reconcile environmental, social, and economic demands, are the three pillars of sustainability. The concept of the Triple Bottom Line covers Planet, People and Profit. The politics of the environment", as opposed to environmental policies is responsible for the shaky global environment. The challenge ahead of us was how to adjust our lives our business strategies and politics generally to the very first and only really global issue ever to confront mankind. It affects us all regardless of who we are, where we live, if we are poor or rich, black or white. We still do so little about it. Today everybody talks in terms of sustainability. And it seems as everybody in the business community agrees that government, business and civil society have to interact in a constructive way to find solutions to the challenge of sustainable development. What is sustainability? Is it a new term or has it been around for a while? Is there an "official" definition or is it up to anyone to tell. The answer to the first question is: It was around before Brundtland although she helped to popularize the term in her famous report, Our Common Future. My comment to question two is: If you really want to know what a sustainable development means try to think about the anti dot of that term; a not sustainable development. We have - at least in theory - added an ecological dimension to development and given it the same status as the economy. That is why policies that used to be considered sustainable have to be looked at again. Striving for sustainability is an ever ongoing process. Some like to say it is a
win-win concept. I wouldn`t oversell that argument. It is about getting used to a new paradigm both in business and politics. It is about a transition, and transitions carry costs, both economically and politically. Economist Herman Daly talks about our new realities in terms of a full world and an empty world. An empty world with few people and lots of natural resources, and a full world, a world full of people and with the natural resources running down. Another economist, Kenneth Moulding talks about two kinds of economic models, a "cowboy economy" versus a "spacecraft economy". His reference point is the American Wild West during the 19th century. There were so many forests, so much water, so much arable land and so much fresh air - and so few cowboys. Everything was up for grabs, and nobody was there to tell you not to leave your garbage behind. And nobody could even imagine that those resources could be scarce. There was no limit to growth. But in Mouldings second scenario there is a limit to growth: If in the future a large part of the world population will be forced to live in a "spacecraft economy" each drop of water and each unit of energy will have to be saved to make possible future life on earth. We are somewhere between those two scenarios now, heading in the wrong direction. What have we accomplished so far, is there room for optimism or is it all gloom and dome. I see two complementary pictures, one small and one large, and they are both true. The small picture contains a growing new awareness among all of us ; from day care center kids
to presidents of companies and nations; greening of business has become a popular political slogan and a corporate reality; green NGO:s are mushrooming ; Nations have EPA's and environment ministers and there is an abundance of new science and new legislations. There is a world wide campaign against climate change, alternative energy sources for producing electricity is being introduced and investing in green technology as a means to stimulate economies in recession, gains support in many countries. The large picture tells you in no uncertain terms what is happening to the natural resources we say we are rescuing from being depleted: Ÿ Ground water; we are pumping more
than is being replenished Ÿ Forests; we are losing millions of
hectares of rainforests every year Ÿ Arable land; disappearing faster than
the number of people that will depend on land for growing their crops Ÿ Fishery; overfishing easily beats efforts to stop it Ÿ Climate change; it is a reality, regardless of how much is man made and how much is natural. In summary: We are living beyond our natural means, and we know we are. There is no point in denying that progress has been made, neither is there a point denying that there are trends that are very alarming. Imaging a graph with two curbs and a horizontal axe. The upward going curve represents a growing (although unevenly distributed) wealth, the down going curve represents the depletion of the natural capital. We want the down going curb to turn upwards up to where it used to be - in the horizontal position. That's when we have sustainability. Continued on page 8
Quality Times January 2012
SUSTAINABILITY HAS BECOME THE ECONOMIC GAME-CHANGER * Christopher Gleadle Is Sustainability A Myth Or Reality? To me: it is common sense. And in founding a new long-term, visionary, world economy, there is no more apposite topic than sustainability where we develop and establish a durable value generating business model delivering long-term protection of the global economy, society and natural capital. And in order to establish sustainability as a business model organizations need to understand the nexus between energy, water, bio-diversity, green house gas emissions as well as their wider societal impacts: defining them into one coherent policy and reporting framework. In developing the framework companies will see and understand the effects of multiple environmental and social stressors upon one another: how they can work against one another causing a destruction of value. 'What you measure badly, you will manage badly.' To drive sustainability and eco-efficiency it is important to understand data capture is equal to how that data is used, measured and verified because the information gleaned from sustainability foot-printing helps create economic models, which assist in understanding the company impact in terms of environmental, social and economic behaviour. Basically, eco-efficiency spans energy intensity and energy efficiency, as well as the durability and recyclability of a product life cycle, which further illustrates
the extent to which companies are exposed to changes in consumer values. Furthermore, sustainability deals with the ability for a company to manage environmental and social risks successfully, evidenced through the quality of supply chain management, integrated sustainability and accounting audit, implementation of environmental management systems, training, and lastly, the ability for a company to reap future competitive advantages from environmentally driven market trends and profit opportunities provided by the company's well developed sustainability and eco-efficiency policies. Additionally, proactive 'event' prevention processes embedded into a company's sustainability policy will aid operating efficiency and profitability because, for example, waiting to understand the financial impact after a negative 'event' is tantamount to the board burying their head in the sand and basing corporate risk management on the hope and a prayer that nothing will happen. This view being supported by studies from as early as 1983, and repeated since, which have shown consistently, and rising in magnitude, that: while stock price of companies is stronger following positive environmental information - what is even stronger, is the price decline in response to negative news - hence the biggest cost is to do nothing. And, while many managers believe that the only responsibility of the firm is to engage in profitable activities, maintaining, this does not include environmental and social impacts, sustainability bridges the gap between
Quality Times January 2012
environmental and social concerns and the need to make a profit - reducing environmental and social risk, optimising resource use and driving innovation to more efficient products and services. Furthermore, whilst recent reports by the Carbon Disclosure Project and Economist Intelligence Unit indicate higher valuations for sustainability engaged organisations, this is underpinned by recent empirical studies showing the negative impact on value for low eco-efficiency is larger in magnitude to the positive effect on the high ecoefficiency company. Additionally - all things being equal - the valuation differential between the most ecoefficient company's and the least ecoefficient company's increases over time. Therefore, suggesting, managers have no reason to worry that an environmental policy conflicts with the company's primary financial objectives. M o r e o v e r, p o o r e n v i r o n m e n t a l performance could suggest a sign of operational inefficiency, which ultimately leads to competitive disadvantages. Besides, for a new era of deep customer engagement, customers no longer separate a company's actions from the products and the brand. As such, sustainability has become part of the customer experience. So, sustainability buttresses the sales and marketing functions, assisting the company to move t o d e e p e r, d i a l o g u e d r i v e n communications, strengthening the bonds the company has with its markets. After all, companies for the image they project to: customers, suppliers, investor,
Likewise, companies that routinely go out of their way to experience the world from their customers' perspective routinely develop better strategies. Sustainability is a quality stakeholder engagement programme of continuous improvement. Once embedded into the DNA of the company, the whole team shares and aspires to the ethos; customers and suppliers become involved in the process and support the strategy. This does mean decision makers must take themselves on the illuminating journey of sustainability; creating experiences which help them instinctively grasp the mis-matches that may exist between what the new strategy requires and the actions and behaviour that have brought success up to this point. By connecting the board, senior managers and employees, there is a support base for influencers to feel connected to the strategy. Therefore, sustainability creates a positive halo for the brand amongst staff, developing the right experience, chemistry and attitudes for the staff to be proud, while creating the right spirit with which customers are engaged. Notwithstanding the development of reports being used as business tools, leading towards managerial creativity around new ways of building brand and reputation to meet with the new customer and other stakeholder demands and expectations. Similarly, experience is showing, as highly qualified eco-boomers come to the work market from university, they are choosing whom to work for with more consideration as to the values of the employer, making sustainability a major factor in decision-making. Business is having to adapt to the changing requirements and needs of the workforce and its ability to attract best talent as people revise their goals, priorities and expectations as they look to make efficiencies in how and where to live and work - as, commuting is less attractive with the associated impacts of time, cost and emissions being factored. Moreover, with best talent there is a natural progression toward evolving products and services reducing customer
impact and building further the bonds of trust and legitimacy to operate, delivering long term value creation while moving away from the corrosive past economic and business models. Equally, from a procurement paradigm, there is comfort in dealing with a highly sustainable supplier as there is risk mitigation against underlying future costs hidden behind a veil of potential social and environmental cost. It is important to avoid being associated with a company of negative, out of date, old school ideas which in itself, creates fear to purchase for the sagacious buyer. So, to develop a robust policy towards eco-efficiency, support needs to be garnered from the CFO who has a unique vantage of operations, by seeing it from a purely financial paradigm. Therefore, CFOs are having to become more strategic as they become used to the balancing act of profit and the credo of sustainability being connected, and make environmental considerations accountable, treating them with the same level of transparency as the financial metrics making the process of tracking environmental, social and economic costs and benefits across the organisation - its assets and operational activities - easier, so avoiding poorly measured random environmental projects and creating a sustained process of intended actions, clear outcomes and business benefits. While, additionally, sustainability offers risk mitigation against the failure to disclose environmental risk, thus, protection against reputation damage, and gaining poor peer rankings in investor research. However, CFOs must connect with energy management and sustainability teams; moving from isolated teams to pervasive aspects of all critical business functions, thus, maintaining robustness in verification and substantiation of developed KPIs and associated metrics. This in turn will create visibility and inclusion of sustainability into core business practices and accountability processes, for example: capital requests would now include energy and resource consumption, enabling the ability to apply whole life cost analysis of asset ownership; and initiate post project measurement and verification, critical to deliver confidence in current and future energy and resource project savings
Quality Times January 2012
claims. Likewise, with innovative technology being looked upon as a key to ecoefficiency, on its own, is not a panacea for all the ills, because while investment in low-carbon technologies will help reduce energy consumption and greenhouse gas emissions, to optimise such investments, the procurement of such technologies must be linked to the company wide sustainability strategy; holistically linking organisational processes to these new technologies.
and other societal stakeholders. It follows; society gives legitimacy for the company to exist, making sustainability critical for competitive advantage, as sustainability becomes the key to driving business in today's world.
The point surely: serving the best interests of the environment and communities can also be seen to be the right financial approach. Besides, for CEOs, without the passport of sustainability, companies tread the boards of high risk through the contagion of poor business practice, leading ultimately to business exclusion through the removal of society's licence to do business, and part through the momentum of mandatory reporting. Examples of such mandatory acts are: Climate Change Act and the Carbon Reduction Commitment Energy Efficiency Scheme in the UK, Grenelle Act in France, Sustainability reporting law in Finland, as well as many others across the globe. And, whilst most trends emerge slowly, or very slowly, sustainability is gaining traction across the globe, as its implications are felt across entire value chains. Companies tend to react to trends, or in the case of sustainability, continue waiting for legislation. Leave it too late, and it will become almost impossible to mount a strategically effective response and will deliver no influence on shaping change to your advantage. In addition, researchers rightly argue that the advantages resulting from social and environmental compliance with regulatory requirements are not a primary source of competitive advantage. For example: the mere fact of environmental compliance hardly allows a company to distinguish itself from its competitors, because most intra-industry peers are affected by compliance in a similar way. Real benefits to organizations will come from more rigorous forms of environmental performance that require both changes in production and manufacturing processes combined with a long-view management style.
Ultimately, proactive environmental performance within a company requires structural change in production and service delivery processes - such redesign involves development, acquisition and implementation of new technologies leading to economic advantages against competitors. Therefore, the cost of delay is steep, both in terms of operations as well as lost market position. Yet, for companies who are ahead on the curve have been able to tailor strategies to the new environment and (as previously discussed) have taken a financial lead on competitors who have, or are, still ignoring the shifting market place. And, with businesses learning to deliver higher quality, more efficient products and services from a more efficient and optimised base of resource utilisation, sustainability addresses the triple bottom line of: Environmental, Social and Economic: Environmental - reducing emissions and bio-diversity impact Social - training and improved team cohesion of the human capital; further combined with societal improvement through investment in communities. Economic - extended competitive advantage and value, long-term economic growth through improved trust, ethicises, operational optimisation and innovation. The practice of half hearted, windowdressing, sustainability engagement, will be a danger to reputation - eroding trust and competitive advantage. Indeed, with society demanding a repair of trust as one of the many results of the
recent 'Great Recession', sustainability is a wonderful opportunity for business, the environment and society to benefit because sustainability connects and exposes the interdependence of structure, conduct and performance allowing the company embracing sustainability to reap the rewards of positional advantage, by conferring and living by the unique benefits delivered to them. Sustainability, furthermore, breaks the cycle of typical strategy setting which applies much emphasis on the status quo - metrics extrapolated from the last three or five years. Whilst, sustainability is about gathering the backward looking metrics; once turned to face forward, gives insight into cost reduction and process optimisation for the future. Nonetheless, it is easy to think success will just continue. The challenge is to watch for signs to the contrary and use those signs as the catalyst for change. Winning, like sustainability, is a journey and not a destination, and sustainability enables and drives a cycle of continual improvement allowing an organisation to be clear where it is on the strategic journey: protecting the strongholds, giving vision on how competitors are reacting, evoking thought about how to create - and not just capture - value as the market matures, how much risk is there in the supply chain, and lastly, how much will it cost not to develop a sustainability strategy. The cost of doing nothing is greater than the cost of engaging Sustainability as a strategy is about optimising resource use and allocation and understanding what is working and what is not. Notwithstanding that, what
does working really mean? Sustainability breaks down and modulises what is working so you can see what it actually looks like, what it means and what costs can be stripped out and processes optimised. Additionally, some of the worlds largest institutional asset managers are publicly demonstrating their commitment to investing in companies that are deemed socially, morally and environmentally responsible and adhere to the United Nations Principles of Responsible Investment and as so aptly put by: Aviva Investors London CEO Paul Abberley "Markets are driven by information. A lack of information as a result of limited or nondisclosure of ESG (Environmental Social Governance) data makes it difficult for long-term investors such as us to assess the wider ESG risks and opportunities associated with a company." There is repeated evidence of a positive relationship between sustainability performance and stock returns. Furthermore, results suggest that companies that adopt higher, more stringent criteria, have a higher valuation than those that use less stringent ones. So, this suggests those who attain a higher GRI or CDP rating are increasing their value over competitors of lower ratings. In conclusion, sustainability is about collaboration, skills development, innovation and optimisation of the triple bottom line. Sustainability helps and guides a company to get specific about what can be shaped and what points of influence can be put in place sustainability is invaluable. * Sir Christopher Gleadle is the founder of the CMG Consultancy
Continued from page 5
Is economic growth to be blamed? Yes and no. It is not the growth itself that is the problem though - how could it be; stagnation cannot possibly be a recipe for progress - it is how growth is being generated that counts. This is to say that we need to stop achieving growth through destroying the world's forest, over fishing the oceans, polluting the air, letting the soil erode and continue to spew out carbon dioxide into the atmosphere. And that's where business comes in Ÿ Said Kofi Annan: we cannot reach the
Millennium goals for development without the help of the private sector. Ÿ We need products that require less energy, have less toxicity, can be reused and valorized in a way that eliminate waste Ÿ We need engines for cars, busses, trucks and airplanes that are more fuel efficient and ultimately not depending on petrol Ÿ Business also needs to discover the markets of the poor (or the fortune at the bottom of the pyramid as JK
Quality Times January 2012
Prahalad puts it in his book with that title) because fighting poverty is also part of protecting the environment Ÿ We need to value - and find means to measure - the world's natural capital as thoroughly as we value and measure financial capital. Ÿ We need innovators, both in politics and in business. * Dr. Ola Ullstan former Prime Minister of Sweden This is a speech delivered by him at the IOD’s Global Convention 2011, London
Sustaining Business Ethics * Lt. Gen J.S.Ahluwalia PVSM (retd) Introduction Business operates within a social and political context. At the same time, business also shapes that context. What are the relationships between business practices, societal expectations and public policy-making? How does business seek to influence public policymaking? How does business seek to influence public and public opinion? How has that influence shaped social outcomes in areas, for example, of distributive justice and environmental sustainability ? How can we make it better? The Enron debacle, the demise of Arthur Andersen, questionable practices at Satyam, Tyco, Qwest, WorldCom, and a seemingly endless list of others have pushed public regard for business and business leaders to new lows. The need for smart leaders with vision and integrity has never been greater. Things need to change-and it will not be easy to ensure business ethics that will help all leaders within an organization to: Ÿ Internalize core values Ÿ Build a values-based culture across
the organization Ÿ Take action and raise the ethical bar.
A cascade of public distrust - and disgust - has followed ethical transgressions by some of the most visible business leaders, creating trauma on many fronts, none more critical than the need for leaders who can raise the level of business ethics-and spread the word. In some circles, the mere mention of Ken Lay of Enron, Bernie Ebbers of WorldCom, Reddy of Satyam or a host of others - CEOs once heralded for their seeming genius-now elicits fervent cries for jail time and financial castigation.
Spirituality and business ethics - interest in spirituality within the workplace has grown exponentially in recent years - both from instrumental and normative perspectives. What have we learnt so far? How are the paradigms compatible with one another? How do we manage the demands of the different 'spirits': the spirit of capitalism, the spirit of mother earth, the spirit of religions, the spirit of man, the spirit of Woman-amongst others? Ethical Leadership Jeffrey Immelt of GE said, "Leadership must be about high performance and high values". And values don't come from some vacuum, they result from a strong heritage of trust and integrity - an internal transparency of the value of integrity, leaders who have clear points of View on integrity, who can effectively teach them to leaders at all levels of their organizations. It starts with leaders' getting their stories right. To help people in the organization internalize your core values-to compel their attention, grab them emotionally, challenge them to raise the ethical bar - all business leaders at the beginning of the twenty-first century need to have as business ethics in particular - what they will and won't do values and absolutes for their organization, examples they model so their employees can follow suit. Great companies are built on ideas. By passing ideas to others and teaching others how to develop good ideas, leaders create organizations that are finetuned to deliver success. These ideas can provide the answer to questions such as 'where are we going'? What are we aiming to accomplish? Winning leaders articulate values explicitly and shape them to support their business ideas. You Quality Times January 2012
have got to find a way to attract people who know how to give back to the environment, and give back to the community, and give back to the workplace. Winning leaders have a clear set of beliefs and actions for motivating others to buy in to and internalize the values of the organization. Winning leaders are also motivated and they motivate others about change and transitions. Leaders energize others when they personally interact with them. Great leadership is about making tough yes/ no decisions. Winning leaders face reality, and then make the hard decisions about people, products, businesses, customers, and suppliers. All successful business leaders must be able to articulate their view on business ethics and drive it through their organization, to engage others to teach the same values and lessons to their people, to build a value-based culture across the organization, to ensure that unlike the situation at Enron and otherseveryone knows the ethical line and is neither shy nor silent, if people risk crossing it. Warren Buffett, CEO, Berkshire Hathway said; "In looking for people to hire, you look for three qualities: integrity, intelligence and energy. And if they don't have the first, the other two will kill you. You think about it; it's true. If you hire somebody without the first, you really want them to be dumb and lazy… contemplating any business act, an employee should ask himself whether he would be willing to see it immediately described by an informed and critical reporter on the front page of his local paper, there to be read by his spouse, children and friends… we simply want no
part of any activities that pass legal tests, but that we, as citizens, would find offensive… it takes 20 years to build a reputation, and five minutes to ruin it. If you think about that, you'll do things differently." And that only scratches the surface. Yet with so many opportunities and audiences with which to cross the ethical line, attempting to define or legislate proper behavior is impossible. Some legal absolutes can be defined. But real ethical behavior and understanding can only result when the right norms and examples are shared and internalized by organization's leaders. The challenge is for all of us to see the hypocrisy that resides in us and to be in a continual state of closing our integrity gaps. Ken Blanchand once wrote "There is no softer pillow than a clear conscience". Business person has to operate ethically, with a personal commitment to help renew public faith in business. The core principle is that leaders must be people of integrity who are able to work in teams, understand diversity, and have a clearly developed set of values. Business Ethics One of the most important 'ingredients' of Total Quality in a workplace is business ethics, even though very often, either workers or customers doubt in possibility of joining ethics with business. According to John W. Collins, business ethics is an oxymoron, which means that two apparently contradictory concepts have been brought together. When saying that business ethics is an oxymoron suggests that there are not, or cannot be, ethics in business - that business is in some way unethical, or that it is, at best, amoral. Revelations of corporate malpractice could be considered as perfect example of above comprehension; after all such situations are not part of everyday business activities. Similarly, it would be wrong to infer that scandals involving corporate wrongdoing mean that the subject of business ethics was in some way naïve or idealistic. On the contrary, it can be argued that the subject primarily exists in order to provide us with some answers as to why some certain decisions should be evaluated as ethical or unethical, right or wrong. In reference to James O'Toole, "ethics is not about answers. Instead, ethics is about asking questions. It is about asking lots of questions and, maybe, if you are lucky, even asking the right ones every now and
then. Ethical organizations do not shy away from asking potentially embarrassing questions, ones that might disturb status quo".
integration of basic ethical principles, while code formulation has become a more dynamic, participatory, and inclusive process.
If we search for definition of business ethics, we have to ask ourselves what is morality and ethics itself, so that it would be less difficult to find suitable explanation of that controversial term. In common usage terms morality and ethics are often used interchangeably, Nonetheless, making a distinction between those two terms brings certain advantages, that is why we could use following definitions:
Ÿ Morality is concerned with the norms,
values, and beliefs embedded in social processes, which define 'right' and 'wrong' for an individual or a community. Ÿ Ethics is concerned with the study of morality and the application. Ÿ Company business ethics principles statements, stress two objectives: 1. Improving employee capability for making decisions that are in accord with corporate policy and legal requirements. 2. Giving concrete expression to the company's sense of mission, and its view of the duties and responsibilities that corporate citizenship entails. Teaching Ethics Teaching business ethics - Calling for change in the practices of business, requires that we look at what and how we have been teaching business students. Based on the past experiences, how should we approach ethics in a business programme? How will the global financial crisis influence the teaching of business ethics in universities and elsewhere? What do we mean by 'teaching business ethics'; at all? Myths in business ethics - Dissatisfied with current trends in the field, a growing number of scholar 'go back to basics' and reread originals texts from philosophers, economists or early management theorists with hopes of clarifying assumptions most take for granted. What assumptions should be questioned? Which myths pervade the business ethics area? How did they form and develop? What could they tell us about ethics, business and people? Increasingly, business schools in all parts of the world are including ethics issues in the management education. There is greater evidence of awareness and
Quality Times January 2012
We cannot stress the global citizenship element too strongly. The moral imperative to give back to society is essential for a just society. And as Peter Drucker says, "Citizenship in and through the social sector is not a panacea for the ills of post-capitalist society, but it may be a prerequisite for tackling these ills. It restores the civic responsibility that is the mark of citizenship, and the civic pride that is the mark of community." Some have become highly suspicious of the use of 'ethics' in business jargon. Endless waves of corporate scandals do little to prove them wrong. Others focus on the positive outcomes that years of civil society lobbying have brought to business practice. Yet others deeply care for the idea of 'business ethics' and try to maintain a fine balance between market demands and the imperatives to improve society as a whole. In our long study of leadership and citizenship, we have come to believe that no institution-religious, military, educational, political, or business- can be great unless it has a great leader at the top, with great values and ethics, who teaches and develops leaders at all levels of the organization. The goal is to have leaders at all levels who all teach and develop other leaders. Undeniably the field of business ethics has grown and changed in recent years. At the turn of the twenty-first century, hopes remained high that corporations could and would embrace more sustainable and responsible management ethics, thereby effecting positive change in society. Many in academia have since worked alongside business practitioners to understand the challenges and opportunities inherent in implementing a new business paradigmone which is more humane, more socially and environmentally conscious, more inspiring, more spiritual, more successful in the long-term. Implementing Ethical Practices Ethics is no longer 'rhetoric', but the power of insight and courage to create and use ethically desirable means to sustain organizations in an ambience of liberalism and democratic choice.
In a value driven organization profits are not paramount, but are expected to come as a result of the ethical treatment of customers, employees, suppliers and other constituents. The value of ethical conduct in business reflects beliefs in doing the right thing. Are the ethical values underlying the decisions consistent, and in keeping with the highest standards of both the organization and leader. Companies now recognize that the directors and employees have a central role in upholding the companies ethical standards and code of conduct. There has been a significant increase in company efforts to institutionalize ethics codes, and programs resulting from: Ÿ greater
board of directors participation in all phases of the ethics program Ÿ establishing ethics offices, and in many instances, the appointing of an 'Ethics officer'. Statements of rationale are increasingly common code features. While compliance is statement of 'do's' and 'don'ts', and values are declaration that certain ethics principles are essential to what it means to be an employee or representative of the company. The utilization of ethical decision-making procedures enables managers to act in a manner that is morally consistent with principles that are at the core of corporate identity. Ethical decision making requires an employment environment of trust that is free from reprisals for employee decisions and actions taken in good faith. Notwithstanding the opposition to strong ethics programs, company commitments and involvement is growing. Company efforts to institutionalize the formulation, dissemination, implementation, and monitoring of business ethics principles are no longer a largely US phenomenon. Becoming worldwide in scope means becoming multi-cultural - Ethical values are precisely where men and women come together. Companies now use a wide variety of compliance packages and social audits to reinforce their ethics initiative. It is a never ending challenge to make sure that mix of honesty, candor, and judgment are in equilibrium. The tug to conform to organizational
norms can breed conflict between doing what is 'ethically right" and doing what the company see as normal and expected. Values take on growing importance, as an organization matures. The rapid pace of industrialization of business has been confronting companies with the formidable challenge of formulating and implementing global business practice standards and monitoring them worldwide for effectiveness. Many NGOs are now ever demanding that issues such as environmental responsibility, fair labor practices, anti-corruption and safety be addressed. Organizational psychology talks of getting in touch with your emotions for changing 'attitudes' and 'behavior'. Values are essential for becoming skills are necessary for doing. Values relate to inner world, skills to the outer. This is where a holistic, integral, robust and time-tested model of the human. Becomes the right starting point; the current benchmark. Durable, long - term effectiveness depends equally, if not more, on the practice of sound human values Jack Welch, Retd CEO, GE said: " The first and most important of our values ie. Integrity, means always abiding by the law, both in letter and the spirit. But it's not just about laws; it is at the core of every relationship we have. Inside the company, integrity establishes the trust that is so critical to the human relationships that make our values work. With trust, employees can stretch performance goals and can believe us when we promise that falling short is not a punishable offense. Our commitment to integrity, which beyond doing everything right, mean always doing the right thing". Getting business's ethical house in order starts with people. Consider that ethical transgressions can occur on countless levels. We look at two variables: the environment and the person. Consider how your ethical miscues can affect people - employees, colleagues and superiors, suppliers, customers, internal regulators (lawyers, auditors, the board of directors), external regulators (government, interest groups, and the like), shareholders, or the public at large in your community. You can affect any or all, separately or combined, consciously or not. And you can have an impact on how they think of you in numerous ways - through corporate citizenship, product quality, your business plans and strategy, how Quality Times January 2012
openly and candidly you communicate, by the clarity of your business reviews and reports-internally and externally, by the transparency of your financial and other public statements, and you certainly have an impact on your image if you commit premeditated fraud or deceit, or even violate criminal laws. These can be acts of commission-or acts of omission, venial-in the moral theologian's view-or mortal.
Business ethics are the desired norms of behavior, exclusively dealing with commercial transactions. Values plus knowledge equals ethics.
Conclusion The last decades have seen the bringing down of the iron curtain, increased awareness amongst civil societies, and professionalism in management, globalization & demand for accountability in all spheres of life. Changes like opening up of economy, ascertaining of rights by citizens , right to information , rapid economic growth , emergence of Indian MNC s and India emerging as world's knowledge power. The rapid proliferation of information and communication technologies has lead to a global diffusion of ideas & practices, enabling the public to demand higher standards of ethics, transparency and accountability. This has led to emergence of good governance systems which would be more sustainable responsive, transparent & citizen centric. Better governance has to lead to sustainable development, responsive to public policies, with higher levels of public sector performance & systematic changes. There have been several instances where management processes have been reduced substantially through systemic reforms. However, still lot need to be done to combat corruption. This paper has highlighted, the following:Ÿ How company behaves in a pinch
usually comes down to its core ethics. By openly discussing the challenges an organization faces and the values it stands for, ethics got cemented with the culture of the organization to drive behavior when it counts. Ÿ Citizenship activities can reinforce the ethical commitments of both leader and the organization, putting some of the most challenging dilemmas in life. Ÿ Today's business leaders must fight to win the renewed support of a skeptical public-not through new products or fads, or other manipulations -but with foundations of ethical absolutes, the world can trust. Today, the field ethics in management is
more relevant than ever before ethical standards are highly regulated in most of the countries. In numerous conventions, different issues relating to codes of ethics, fight against corruption, fight against fraud and organized crime, governmental
strategies to support ethical standards, etc. are being discussed. Organizations like Transparency International, the global civil society organization, etc., lead the fight against corruption; bringing people together in a powerful worldwide coalition to create
change towards a world free of corruption, bring order in public administration, besides setting standards. * Lt Gen. J.S. Ahluwalia (retd.), is President, Institute of Directors
FORTUNE-COOKIE MANAGEMENT Your managerial style and skills are critically important. The list below contain nuggets of wisdom, similar to the fortune cookies found in Chinese restaurants, which you can apply to enhance your relation with your subordinates and thereby achieve the goals of increased effectiveness, efficiency and satisfaction in the workplace. Management Style Ÿ "Good enough isn't good enough - one must strive for outstanding performance.” Ÿ "Trying hard isn't enough - results are what count." Ÿ “It's good to have a healthy dissatisfaction with things that have always been done this Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ
Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ
way." "Let it all hang out…go for it, sometimes." "Treat everyone fairly, but not the same - what you need to motivate one person may not be the same for another person." "Be kind to those joining and leaving the organization." "Good managers are available, accessible, affordable, and able." “There's generally more to things than meets the eye and less to things than your emotions say." "It pays to care - and to care deeply about your individual efforts, your unit, the organization, your colleagues, superiors, subordinates, your clients, and customers' satisfaction." "You've gotta believe in yourself and others". “Don't assume your guardian angel works overtime. You won't be lucky as often as you would like." "Perceptions are as important as reality - people may be wrong about you, a problem, or your work effort but you have to deal with their perceptions." “You've gotta pay your dues - it takes longer to get meaningful and challenging assignments and positions than you have to prove yourself first." "We don't need shooting stars, we need managers who are able, month after month, year after year, to handle their responsibilities." "Motivation and leadership are necessities for success."
Quality Times January 2012
Climate Change Conference at Durban: No Definite Outcome * Pradeep Chaturvedi The 17th Session of the Conference of Parties under the United Nations Framework Convention on Climate Change was held at Durban from November 28 to December 2, 2011 to discuss and decide upon various issues relating to climate change under the UNFCCC and its Kyoto Protocol. India at Durban Conference India played a significant role in reaching a successful consensus for moving ahead in negotiations; and in establishing the second commitment period under the Kyoto Protocol with effect from January 1, 2013, i.e., immediately after the expiry of the first commitment period. It was also decided to begin a process for developing legal arrangements for enhancing actions of all parties under the Convention. India ensured that the new arrangements, which have to be decided by 2015 and implemented from 2020, are established under the Convention. India highlighted the issues of Equity and Common But Differentiated Responsibilities (CBDR) in the Climate Change negotiations. India also played an important role to support establishment of the Green Climate Fund. Countries meeting in Durban delivered a breakthrough, 36 hours behind the scheduled closing, on the future of the international communities' response to climate change. They also recognised the urgent need to raise their collective level of ambition to reduce the greenhouse gas emission to
keep the average global temperature rise below 20C celcius. Comments from Christiana Figueres, Executive Secretary of the UNFCCC is significant when she said, "I salute the countries who made this agreement. They have all laid aside some cherished objectives of their own to meet a common purpose - a long term solution to climate change." Concensus on Universal Legal Agreement The governments decided to adopt a universal legal agreement on climate change as soon as possible, but not later then 2015. Work will begin on this immediately under the new group called Ad-hoc Working Group on the Durban Platform for Enhanced Action. Agreement on Second Commitment period for Kyoto Protocol Governments, including 38 industrialised countries, agreed for a second commitment period of the Kyoto Protocol from January 1, 2013. To achieve rapid clarity, Parties to this second period will turn their economy wise targets into quantified emission limitations or reduction objectives and submit them to review by May 1, 2012. This is highly significant because the Kyoto Protocol's accounting rules, mechanisms and markets will remain in action as effective tools to leverage global climate action and as models to inform future agreements. Advanced Framework for Reporting of
Quality Times January 2012
Emissions Reduction A significantly advanced framework for the reporting of emission reductions for both developed and developing countries was also agreed, taking into consideration the common but differentiated responsibilities of different countries. Full Implementation of the Package to Support Developing Nations In addition to charting the way forward on reducing greenhouse gases in the global context, governments agree on the full implementation of the package to support developing nations, agreed last year in Cancun, Mexico. This means that urgent support for the developing world, especially for the poorest and most vulnerable to adapt to climate change, will also be launched on time. The package includes, the Green Climate Fund; An Adaptation Committee design to improve the coordination of adaptation actions on a global scale, and a Technology Mechanism, which are to become fully operations in 2012. Governments Acknowledge that Current Pledges to Cut Emissions not Sufficient While pledging to make progress in a number of areas, governments acknowledge the urgent concern that the current some of pledges to cut emissions both from developed and developing countries is not high enough to keep the global average temperature rise below 20C Celsius.
Climate Change Actions to be Led by Climate Science The member countries therefore decided that the UN Climate process shall increase ambition to act and will be led by the climate science in the IPCC's 5th Assessment Report and the Global Review from 2013-2015. While all the leaders have expressed their concern that these deadlines must be met, countries, citizens and businesses who have been behind the rising global wave of climate action can now push ahead confidently, knowing that Durban has made acceptable the broader highway to a low emission, climate resilient future. During the Climate Change talks, India has consistently called upon the developed countries parties to raise the ambition to a level that is consistent with science. India has insisted that equity a n d c o m m o n b u t d i ff e r e n t i a t e d responsibilities should remain the basis of new arrangements that aim to enhance action of all parties under the Convention. These arrangements will be finalised in 2015 with the view to implement the arrangements from 2020. Experts' Assessment of Outcome Different assessments of the outcomes are emerging from experts of different shapes and colours. Everyone is trying to make an assessment on the basis of the starting point of COP-13 at Bali in 2007. The main reason being that the Bali Summit had decided to create the Adhoc Working Groups for Long Term Cooperative Action (AWGLCA) and for the Kyoto Protocol (AWGKP), which have been the main arena for negotiation since then. A two year time-frame was given for the global leaders to negotiate and arrive at an agreement at Copenhagen in December 2009. Instead of moving at a fast pace, the global leaders have managed to keep the dialogue open to explore if there is a future possibility of solution through negotiations. The situation that faced countries in Bali was not very different from what it is today. The IPCC-AR4 had just come out, with some of the strongest conclusions till date regarding the magnitude of the climate change problem and the urgency of response. The need to bring US on board in any global regime was felt, as was the need to reflect the changing economic circumstances in the world. While the developing countries were keen to stay
close to the principles of the UNFCCC that also formed the basis for negotiations on the Kyoto Protocol, particularly the principle of Common But Differentiated Responsibility; the developed world wanted to dilute or remove the differentiation and bring all major emitters into a post 2012 regime. Experts believe that the negotiated compromise at Bali was the two-track Bali Action Plan (BAP) where developing countries agreed to a slippery or weaker formation of differentiation in the AWG LCA track; with mitigation obligations of the developing world were parallel rather closely those of the developed; in return for the expectation that the Kyoto track would lead to a strong second commitment period for the Kyoto Protocol. Most of the negotiators believe that this two-track approach could be the basis for a post-2012 regime. An assessment of what has happened after Bali shows clearly that the political mandate for converting the Bali Action Plan into a binding agreement has not been able to produce much. The developing countries had believed that Ad-hoc Working Groups for Long Term Cooperative Action will be linked to the working of the Ad-hoc Working Group on Kyoto Protocol. That has proved to be more of wishful thinking. Durban Conference presents a rather critical point of divergence with regard to the future of global action on climate change. A pledge and review system and a carbon budget-based approach present two quite divergent vision of an undifferentiated regime. On the other hand, we may have reached the boundary of what is possible while staying with in the letter and spirit of the UNFCCC and the Kyoto Protocol.
comprise 20 members, represented equally between the developed and developing world. Ÿ A focussed work programme on longterm finance was agreed, which will contribute to the scaling up of climate change finance going forward and will analyse options for the mobilisation of resources from a variety of sources. Adaptation Ÿ The
Adaptation Committee, composed of 16 members, will report to the COP on its efforts to improve the coordination of adaptation actions at a global scale. Ÿ The adaptive capacities above all of the poorest and most vulnerable countries are to be strengthened National Adaptation Plans will allow developing countries to assess and reduce their vulnerability to climate change. Ÿ The most vulnerable are to receive better protection against loss and damage caused by extreme weather events related to climate change. Technology Ÿ The Technology
Mechanism will become fully operational in 2012. Ÿ The full terms of reference for the operational arm of the Mechanism the Climate Technology Centre and Network - are agreed, along with a clear procedure to select the host. The UNFCCC secretariat will issue a call for proposals for hosts on 16 January 2012. Support Of Developing Country Action Governments agreed a registry to record developing country mitigation actions that seek financial support and to match these with support. The registry will be a flexible, dynamic, web-based platform.
Details Of Key Decisions That Emerged From Cop17 In Durban
Other Key Decisions
Green Climate Fund
Ÿ A forum and work programme on
Ÿ Countries have already started to
pledge to contribute to start-up costs of the fund, meaning it can be made ready in 2012, and at the same time can help developing countries get ready to access the fund, boosting their efforts to establish their own clean energy future and adapt to existing climate change. Ÿ A Standing Committee is to keep an overview of climate finance in the context of the UNFCCC and to assist the Conference of the Parties. It will
unintended consequences of climate change actions and policies were established. Ÿ Under the Kyoto Protocol’s Clean Development Mechanism, governments adopted procedures to allow carbon-capture and storage projects. These guidelines will be reviewed every five years to ensure environmental integrity. Ÿ Governments agreed to develop a new market-based mechanism to assist developed countries in meeting part of their targets or commitments Continued on page 35
Quality Times January 2012
Are your DIRECTORS trained? Can you afford to appoint directors who are not CERTIFIED?
Directors of India’s best known private & public enterprise at Masterclass in Delhi
Qualify yourself to become an Independent Director through
Masterclass for Directors
What Participants Say
“A very useful course”. Dr. Kaarthikeyan, former Director, Central Bureau of Investigation
“Excellent Program” T.S. Vijayan, Chairman, LIC India
Certified Corporate Director
“Balanced Scorecard, Finance for Non Finance Directors, Duties & Liabilities and Corporate Transformation are the best aspects”. Sanjay Jain, Managing Director, Accenture
Bangalore Mumbai New Delhi Dubai London
: : : : :
24-26 February 2012 24-26 February 2012 02-04 March 2012 23-24 April 2012 07-09 October 2012
“One of the best and relevant program” Yogesh Lohiya, CMD, General Insurance Corporation “Sharing relevant knowledge is the best aspect of this course”. T.R. Doongaji, MD TATA Group Services “Couple of our directors had attended Masterclass in bangalore and had appreciated the programme immensely. We would like all our directors also to attend the programme. V. Kala, Company Secretary, Cochin Shipyard Ltd. “My greatest appreciation for the manner in which you presented your material, rich in content, depth of experience and overall expertise including international matters was mind boggling”. Felix D’Souza, Head Corporate Governance, Abu Dhabi
“It was a great learning experience” Prof. Gregorio Flores, Texas, USA “I would like to recommend each Director to undergo this training program” F.K. Siddiqi Director, Hinopak Motors, Karachi
Institute of Directors
“This Programme was the best investment I have made” Basant Kumar, former Additional Secretary, GOI
M-52 (Market), Greater Kailash-II, New Delhi - 110048, India Tel: 011 - 41636717, 41636294, 41008704, Fax: 011 - 41008705 Email: email@example.com
Quality Times January 2012
® Registered Trademark
Are you looking for
We have a large database of qualified directors across all major industries to meet your requirements of suitable Independent Directors FREE OF CHARGE Organization of Non-Executive Independent Directors (ONEID) is a part of Institute of Directors (IOD) to promote and maintain a panel of suitable qualified Independent Directors for Corporate Boards. The new Company Law which is likely to be cleared soon by the Parliament, will make it mandatory for all registered companies, whether listed or unlisted, to have one-third of the Board as Independent Directors. IOD has already started receiving requests for suitable CV's by organizations in different sectors.
Are you a
Initially, we proposed to panel all the professionals who have gone through and qualified in Masterclass for Directors, organized by IOD during the last over 7 years. In view of this, those desirous of joining the pool of Independent Directors are required to complete the ONEID Application form and send to us along with the full CV.
Organization for Non Executive Independent Directors (ONEID)
INSTITUTE OF DIRECTORS M-52 (Market), Greater Kailash Part-II New Delhi â€“ 110048, India Board Nos. : +91-11- 41636294 , 41636717, 41008704 Email: firstname.lastname@example.org
Quality Times January 2012
Quality Times Quality Times January 2012
Quality Times 18
Quality Times January 2012
22nd World Congress on TOTAL QUALITY Theme: “TOTAL QUALITY - The Catalyst for Ethical Business and Sustainability”
19- 21 January 2012 Hotel THE LaLiT ASHOK , BANGALORE, INDIA
Guests of Honour
Event Details: Venue: Hotel THE LaLiT ASHOK, BANGALORE Thursday, 19 January 2012 Welcome Reception
HE Shri Hans Raj Bhardwaj Governor of Karnataka
Hon. Shri D.V. Sadananda Gowda Hon. Dr. Veerappa M. Moily Chief Minister of Karnataka Union Minister for Corporate Affairs
Friday, 20 January 2012 0930hrs 1300hrs 1900hrs 2100hrs
: Inauguration of The Congress 2012 : Lunch : Presentation of Golden Peacock Awards : Congress Banquet
Saturday, 21 January 2012 Dr. Ola Ullsten Justice M.N. Venkatachaliah Hon. S. Suresh Kumar Chairman, IOD Advisory Council former Prime Minister of Sweden Minister for Law, Urban Development & Parliamentary Affairs & former Chief Justice of India
0900hrs : Case study presentations by winners 1300hrs : Lunch 1600hrs : Valedictory Session For complete programme please visit www.iodonline.com
In Partnership with
Lighting of Inaugural Lamp at the 20th World Congress of IOD
THEME Justice M.N. Venkatachaliah Chairman, IOD Advisory Council and former Chief Justice of India
Invitation from the Chairman Dear Friend, We would never have imagined the world would become so uncertain, so turbulent and so volatile. The 22nd World Congress on Total Quality has a strategy to make you a winner, despite these uncertainties and the current turmoil. Indeed, you may be better able to factor in risks and uncertainity in your business, and beat the competition by leveraging these. I have great pleasure in inviting you to the 22nd World Congress on Total Quality being held on 19 -21 January 2012, in Bangalore , India. The IOD can rightly claim credit for being the pioneer in promoting the Quality movement in India. The first-ever World Congress on Total Quality that sparked the Quality revolution was hosted by IOD in 1991. This, as a regular annual event, has acquired transformational value. The event has come to be rightly regarded as a Mecca for business leaders, CEOs, entrepreneurs, management experts, Quality consultants and change agents. It has set new standards of Quality and Excellence, and raised the bar each year. From Quality of products and services, it has moved to Quality of directors, quality of environment, CSR, sustainable business, Corporate Governance and Boardroom performance.This Annual event provides unrivalled networking opportunities. The theme of the Bangalore Congress is “ TOTAL QUALITY - The Catalyst for Ethical Business and Sustainability ”. India, where diversity, and a rich historical and cultural heritage are regarded as national treasure, help reconcile differences and create a fairer climate to achieve end-goals. The famed Golden Peacock Awards for Quality, Training & Innovative Product/ Service will also be presented during the Congress. The reason for selection of Bangalore as the venue is the unprecedented business opportunities offered by the fast moving entrepreneurial and IT capital of India. The Congress will provide you a platform to interact with movers and shakers from overseas, and government leaders & top officials and decision makers in India’s Corporate world, to seek and explore joint business collaborations. You can benefit from the Congress in many ways as a speaker, participant, sponsor, exhibitor or partner, so that together we can ensure sustainable organistions and make this world a better place. I hope to see you in Bangalore. With regards Chairman
“TOTAL QUALITY - The Catalyst for Ethical Business and Sustainability” Objectives · Boards to provide sound leadership and strategy for the success of the enterprise. · Sustainability – an ethical imperative, based on Transparency, Engagement, Accountability and Responsibility. · Disclosure and Transparency as prerequisites for global trust and successful team work in 21st Century. · Corporate ethics – Realigning the moral compass of the board. · Ethical business is the driver for Sustainability. Congress Topics · Realigning the Moral compass of the Boardroom. · Effectiveness of Board's communication with stakeholders and board's decision making process. · Boards role in combating corporate frauds and corruption. · Diversity in the Boardroom to counter 'Group Think' and cosiness. · Transparency – key to restore market confidence and faith in Corporate Governance. · Corporate Conformance – Managing the complex issues of legal, governance and business ethics. · The Power of environment, social and governance issues to build competitive advantage. · Governance indicators that drive accountability and shareholder value. · Accountability and Responsibility of Directors, in 21st Century · Corporate strategy for Sustainability. · Transparency and engagement – crucial for Sustainability. · Driving Quality in Governance to foster Globally Competitive Organization. · Quality Logistics for Management for Management Supply Chain. · Innovation, Risk Management and Governance. · Customer Driven Quality Processes. · Total Quality in HR Function, based on People Capability Maturity Model (People CMM). · Integrated Management Systems – key to Sustainability · Risk management for Quality and Sustainability. · Corporate Social Responsibility and Ethics. · Human Resources for Sustainable Quality. · From Quality Management to Confidence Management. · Quality in a knowledge based Economy. · From Compliance to Creativity. · Transformational Leadership for Change Management. A view of the audience
Ravi Kant Vice Chairman, Tata Motors delivering Keynote Address at 21st World Congress on Total Quality held on 28 January 2011 at Hotel Leela, Mumbai.
From(L-R): Shailesh Haribhakti; S.Z. Pasha Managing Director, B.M.T.C, M.N. Vidhyashankar, IAS Principal Secretary, Karnataka, K.R. Girish VP, Bangalore Chamber Commerce & Sameer Kakkar CFO, Comvivia, India
GUIDELINES FOR PAPER PRESENTERS All paper presenters are required to send their papers by e-mail to email@example.com. A brief CV of 100 words and passport size colour photograph are also required. Speaker guidelines are available on our website www.iodonline.com
WHO WOULD BENEFIT Ÿ Ÿ Ÿ Ÿ Ÿ
All stakeholders interested in quality of their ethical business, sustinability, the wellbeing of society, making profits and improving the quality of life for their organization. Legislators, lawyers, jurists and all those concerned with efficient and ethical conduct of corporates and good governance. Policy makers, political leaders, government officials and decision makers in emerging and developed economies. Business - Corporates and Small & Medium Enterprises (SMEs) Company chairmen, directors, presidents, CEOs, CFOs, bankers, fund managers, company secretaries, NGOs, investors, brokers, chartered accountants, management analysts, management students, financial consultants, academics & students.
MARKETING OPTIONS Sponsorship
Rt. Hon Mark Hoban Financial Secretary to HM Treasury along with Rt Hon Baroness Hanham CBE Parliamentary Under Secretary of State at the Department for Communities and Local Government & Dr. Ola Ullsten former Prime Minister of Sweden presenting the Golden Peacock Award during the Global Convention in London.
The tariff for A-4 size paper colour Advertisement in the Congress Souvenir is as under: Place
Rate Indian ( `) 50,000 40,000 35,000 30,000
Back Cover Inside Front Cover Inside Back Cover Full Page Color
Golden Peacock Awards, instituted by Institute of Directors in 1992, are now regarded as a benchmark of corporate excellence worldwide.The Award has been instituted to celebrate and honour the best of best as recognition of their unique achievements to build the brand. The selection is an elaborate process by a team of professional & independent Assessors. The short listed finalist are then chosen by jury of eminent personalities headed by Justice P.N. Bhagwati,Chairman Golden Peacock Awards & former Chief Justice of India.
The Congress offers a unique opportunity to project your organisation’s commitment to Corporate Governance and Sustainability. The event will be attended by eminent corporate heads, environmentalists and opinion leaders from across the world. Here is your chance to advertise your commitment to good Corporate Governance and Corporate Sustainability for your company’s brand image. The Sponsorship rates are as follows: Indian (in `) Principal Sponsor Platinum Sponsor Gold Sponsor Silver Sponsor Associate Sponsor
10, 00,000 7, 50,000 5, 00,000 3,00,000 2, 00,000
International (in £) 15,000 10,000 7500 5000 3000
QUALEX 2012 Registration Fee
Hon’ble Shri P. Chidambaram, Union Home Minister, addressing the Golden Peacock Awards Nite on 24th June 2011 in New Delhi
Qualex 2012 is a rare platform to display your quality products and services and promote your distinctiveness among the world’s most discerning participants. Two day rental for a shell scheme includes a fully furnished stall (approximately 2m x 2m) with lighting, facia, two chairs and tables, and one complimentary non-residential delegate registration.
Congress Souvenir A Congress Souvenir will be released on the Inaugural Day of the 22nd World Congress on Total Quality. This will be distributed to all delegates, members and associates, industry leaders, concerned govt. departments, decision makers, eminent persons, NGO’s, & institutions etc. worldwide.
The Golden Peacock Awards Secretariat invites applications for the following institutional awards, for the year 2011. Ÿ Ÿ Ÿ
Golden Peacock National Quality Award (GPNQA) Golden Peacock National Training Award (GPNTA) Golden Peacock Innovative Product / Service Award (GPIPSA)
The application forms and self-assessment criteria can be downloaded from website www.goldenpeacockawards.com LAST DATE FOR SUBMISSION : 20 December 2011 The above Awards will be presented during the above 22nd World Congress on Total Quality in Bangalore.
Golden Peacock Awards Nite Austrian Delegation at the World Congress
A view of the audience at the last Conference
Registration package for 22nd World Congress - 2012 (Inclusive of tea/coffee, all refreshments, lunch and dinner Congress Proceedings & Souvenir)
Categories Corporate Delegates Speakers/Paper presenters Students* Accompanying Spouse
Non Residential Registration fee _____________________________________________________ Indian (in `) International (in £) ________________________ _________________ Single Single 12,500 160 7,500 120 5,000 100 3,000 38
*For student registration, a certificate from the Head / Registrar / Director indicating studentship at the institution would be required. Note: If sending more than one delegate, please fill in personal details separately.(This form may be photocopied/ reproduced) Registration details : Ÿ Ÿ Ÿ Ÿ
Registration fee is non-residential and non-refundable Changes in nominations are acceptable The fee in Indian rupees is applicable to Indian nationals. British Sterling Pounds to others. Confirmation of registration is possible only if the form is received with the fee and is subject to space availability.
Early Bird Discount
10% discount on registering before 31 December, 2011 5% discount on registering by 07 January, 2012
REGISTRATION FORM To register, please complete this registration form in BLOCK LETTERS and return it to the Conference Secretariat at the address below by email/post/fax, together with payment of all fees. Registration will not be effective until the payment has been received. To register by email, please fill in Digital Registration Form and e-mail to firstname.lastname@example.org. To book online, visit www.iodonline.com. I am interested in participating in the "22nd World Congress of IOD " programme as a Delegate / Speaker / Sponsor / Partner / Advertiser __________________________________ Name Dr/Mr/Ms______________________________________________ Designation ______________________________________ Organization __________________________________________________________________________________________________ Address ______________________________________________________________________________________________________ _________________________________________________________Postal Code_______________Country______________________ Telephone _______________________________Mobile ___________________________Fax __________________________________ E-mail ________________________________________________________________________________________________________ For overseas participants (other than UK and Europe, those who would need visa invitation letters) Name (as mentioned in the passport)___________________________________________________________________________________ Father's/Husband's name ___________________________________________________________________________________________ Passport No._______________________________Date and place of issue____________________________________________________ Date and place of birth___________________________________Valid up to___________________________________________________ Citizenship ________________________________ Are you a member of IOD, India (Yes / No): …………………………………………………… Payment details The total amount for INR` _______ may be paid by either of the following (please tick appropriate payment box): (A) Cheque at Par or Demand Draft payable to a bank in New Delhi, India , payable to Institute of Directors , New Delhi (B) Bank Transfer to Corporation Bank , M 3&4 , Greater Kailash Part-II , New Delhi- 48, India,Tel No. 011- 29210667 , Account Name : Institute of Directors ,A/C Type: Current A/C, 9-Digit Code No of the Bank and Branch (MICR Code) : 110017005 ,Account Number: CA01002954, IFSC CODE: CORP0000286, PAN No. : AAABI0002J , SWIFT CODE:CORPINBB286 © Credit Card: Please log on to www.iodonline.com for online payment. Date:
For details :
INSTITUTE OF DIRECTORS M-52 (Market) Greater Kailash Part-II, New Delhi - 110048,India Tel. +91-11- 41636294, 41636717 Fax: +91-11-41008705 Email: email@example.com
(Signature ) NAME
Mumbai: A-1 Monarch Palace, J.B. Nagar, Andheri (E) Mumbai - 400059 Ph. 022 - 67582230 / 31 / 32 Email: firstname.lastname@example.org Bangalore: S-908, 9th Floor, Manipal Centre 47 Dickenson Road, Bangalore - 560042 Ph: 080-25092234, 255817101 Email: email@example.com
The Best Of Times - The Worst Of Times * Peter L. Walker, FCIPR It has not been a good year for corporate governance, or has it?. In the UK a City of London Tribunal is taking evidence from the UK's financial service regulator which holds that two bankers tried to create an offshore vehicle through which one of India's most powerful businessmen could illegally invest in Indian stocks. At the same time and in the same City judicial hearings are trying to establish the truth behind the accusations that some journalists and editors had hired private investigators to hack the phones of celebrities and politicians to provide stories for the News of the World and other newspapers. In Japan the board of Olympus the camera company are finally brought to book after concealing losses running into hundreds of millions in special investment accounts that no-one talked about. It took an outsider, a newly appointed British chief executive, to bring the actions of his board to light by refusing to ignore massive payments to a broker that were almost as large as the amount paid for an acquisition in the US. It isn't difficult to pick a country among the either the developed or the emerging economies and point to an example of this sort of sorry tale of what, personal greed, over-arching ambition, or just incompetence. Of course the media have a field day management is vilified, corporate and brand reputations are trashed. In the UK and the US hapless directors are paraded in front of legislative committees to apologise and be ridiculed by politicians who less than a year earlier had to come clean and in some cases jailed for abusing their expenses. It is almost as ironic as having the Chartered Institute of Internal Auditors
accuse the UK FTSE 100 companies of failing to provide investors with clear measures of how they maintain robust ethical standards. Surely part of the role of internal auditors and, I assume their professional body, is to establish those clear measures as part of the internal audit and external reporting process.
been pressing their case for an internal audit beyond just the financials? Or is it as Dr Ian Peters, chief executive of the Chartered Institute of Internal Auditors, suggests "either companies don't take ethics seriously, or they think investors don't - and the latter is increasingly unlikely to be the case."
After ENRON, where the role of the internal auditor was crucial to eventually revealing the fraudulent behaviour of some board members, surely every internal auditor gained a fresh mission to provide the metrics for quality internal corporate reporting and external d i s c l o s u r e to s h a r e h o l d e r s a n d stakeholders alike.
For the veteran's of corporate disclosure the advocates of transparency and board room rigour there is nothing very new here except that the size and the scale of corporate scandals can impact national finances and international market confidence. When the Institute added that the risks associated with poor ethical standards are significantly increased it said a 'bundle.'
Apparently it is not the case. According to a study conducted by the Chartered Institute of Internal Auditors 91 per cent of FTSE 100 companies refer in their annual reports to their high standards of business ethics and integrity. By trawling through the annual reports of every one of the UKs top 100 companies the Chartered Institute of Internal Auditors found only eight per cent of the FTSE 100 provided a specific metric of their company's ethical performance. The report also showed that 56 of the 100 companies state in their annual report that they have an ethical code or policy. Problem, only three companies provided information to suggest that their employees had read and understood this code, while a further four companies included figures to demonstrate that a proportion of the workforce had undergone training on the company's ethical policy. Now I am not sure who is shooting whom in the foot. Is this an admission that the internal audit and the internal auditors had too narrow a remit and should have
Quality Times January 2012
In 2009 a corporate failure audit trail wasn't all that difficult to sign post © Corporate failure audit trail 1
Short term performance rewards
Incompetent – complacent auditors
Self serving executive directors
Independent directors-board room watchdogs that didn’t bark.... PeterL. Wal ker Executive Chai rman - PIELLE ConsultingGroup www.pielleconsul ting.com
In the same year the duties of directors were defined in law for the first time © London - 2009: Directors’ duties defined in law for the first time “Exercise powers for proper purpose with the company’s constitution Exercise independent judgement, reasonable skill, care and diligence Refuse benefits and declare interests in transactions Act in good faith to promote company success Avoid any conflict of interest” …a statutory framework for accountability …a basis for resourcing independence of judgement PeterL. Wal ker Executive Chai rman - PIELLE ConsultingGroup www.pielleconsul ting.com
But despite the good intentions of the EU Directive for greater disclosure in company reports disclosure beyond financial accounts is still inconsistent. The directors' report serves at best to indicate good intentions and at worst to spot light prized pieces of philanthropy or the cherished CSR programme for the year. No-one can suggest that the systems and processes aren't in place for non-financial reporting to the boards of the UKs top 350 companies. The Corporate Social Responsibility boom of the 1990s made sure of that. The recognition that the globalisation of protest and the availability of technologies to fan the flames in a multi-nationals domestic market about grievances of behaviour in en emerging market has highlighted the risk not of reputations but of real shareholder impact financial risk This chart from 2006 shows clearly that boards should not be short of information. Perhaps the Institute of Internal Auditors should be arguing that they should control or at least validate the methodologies. But they shouldn't be able to complain that boards are complacent or that the information isn't available. In the same piece of research my colleagues at PIELLE identified very clearly that 70 per cent of companies
surveyed had formal systems in place to drive improvements through the company based on the results of the social audit. The 30 per cent that went to the trouble of generating the information but doing no more with it than informing the board must be a worry to any potential or current investor. PIELLE
cent of the UKs largest, and by definition most powerful, companies are concerned to ensure that their employees at all levels in the business understood its ethical code and received training in its implications for them as individuals and as members of a management team. PIELLE
CONSULTI NG GROUP
What internal systems are in place for social and non financial reporting to the board………….. 5%
Pub lic Rel atio ns M anag eme nt Cons ultan cy
CONSULTI NG GROUP
Are there formal systems in place to drive improvements through the organisation following the social audit…..
Pub lic Rel atio ns M anag eme nt Cons ultan cy
70 60 2 4%
Annual strategic review
Part of a routine monthly or quarterly reporting process
Other - Regional committees, Board CSR committees, annual via social reporting process Stand alone
20 10 0 No
© Copyright 2003 P IE LLE Consult ing
There is an assumption that ethics and risk are closely related. Economists talk about the moral hazards in banking. Even McKinsey's landmark research is hardly conclusive that ethically managed businesses are better performing over the long term than those run purely for profit. Transparency and disclosure are important but they can only be indicators of management standards and the ethos of the business. CIIA may be right to moan about the lack on consistent metrics to measure ethical performance. Shareholders and stakeholders in any business should be worried at the risks there are if only 7 per
© Copyright 2003 P IE LLE Consult ing
Over to you internal auditors get together with your non-executive directors and devise a better and more consistent system. In the best of time and now in the worst of times in a world teetering on the brink of economic collapse because of a lack of trust and fear of risk a start has to be made and a demonstration of auditable non financial management performance and ethical standards would be a start.
* Peter Walker is the senior consultant at PIELLE Consultants the international management communication firm based in the UK.
BUILDING YOUR HOUSE An elderly carpenter was ready to retire. He told his employer-contractor of his plans to leave the house-building business to live a more leisurely life with his wife and enjoy his extended family. He would miss the pay check each week, but he wanted to retire. They could get by. The contractor was sorry to see his good worker go & asked if he could build just one more house as a personal favor. The carpenter said yes, but over time it was easy to see that his heart was not in his work. He resorted to shoddy workmanship and used inferior materials. It was an unfortunate way to end a dedicated career. When the carpenter finished his work, his employer came to inspect the house. Then he handed the front-door key to the carpenter and said, "This is your house…my gift to you." The carpenter was shocked! What a shame! If he had only known he was building his own house, he would have done it all so differently. So it is with us. We build our lives, a day at a time, often putting less than our best into the building. Then, with a shock, we realize we have to live in the house we have built. If we could do it over, we would do it much differently. But, you cannot go back. You are the carpenter, and every day you hammer a nail, place a board, or erect a wall. Someone once said, "Life is a do-it-yourself project". Your attitude, and the choices you make today, helps build the "house" you will live in tomorrow. Therefore, Build wisely!
Quality Times January 2012
Quality Times 22nd World Congress on Total Quality Also presentation of Golden Peacock Awards for Quality, Training, Innovative Products / Service 19-21 January 2012 in Bengaluru (India)
12th International Conference on Corporate Governance Also presentation of Golden Peacock Awards (both Global & National) for Excellence in Corporate Governance 7th International Conference on Social Responsibility 23 - 24 November 2012 in Mumbai (India) Also the presentation of Golden Peacock Awards for CSR 25-26 April 2012, Dubai, UAE 3rd Global Conference on SustainAbility Also presentation of Golden Peacock 14th World Congress on Environment Management Awards for Sustainability, Climate Security 20-21 July 2012 in New Delhi(India) & Innovation Management 10 - 12 October 2012 in LONDON ( UK) 23rd IOD Annual Day Also the presentation of IOD Distinguished Fellow Awards 24 August 2012, New Delhi(India)
Institute of Directors M-52 (Market), Greater Kailash-II, New Delhi - 110048, India Tel: 011 - 41636717, 41636294, 41008704, Fax: 011 - 41008705 Email: firstname.lastname@example.org
Quality Times January 2012
* Deepak N. Lalwani OBE Global economy has been turbulent and impacted India's economic growth. Following are the details. Ÿ At
the end of 2010 Foreign Institutional Investors had invested a net $29.3 bn in Indian shares, beating the previous record of $ 17.7 in 2007, a bull market year. In sharp contrast at Christmas 2011 FIIs had sold over $ 400 m in Indian equities. They have avoided Indian shares because of the slowing economy caused by 13 consecutive interest hikes to tame inflation, by political paralysis to push through crucial reforms to kick start the slowing economy and corruption scandals. A knock-on effect has been on the Rupee which has tested all time lows from late November. The SENSEX, after showing sparkling returns of + 81% in 2009 and +17% in 2010, is down 23% at Christmas 2011 . However, despite the bad news this year the "bigger" picture is that over the last 30 years the SENSEX has closed down for the year only 7 times. In the last 5 years to Christmas 2011 £100 invested returned (currency adjusted but excluding inflation and reinvested dividends): in the SENSEX 30: £120, UK's FTSE: £ 88 and in US's Dow Jones Industrial Average: £123.
Ÿ The European Union drastically cut its
growth forecast by over 70% for the euro zone in 2012 to 0.5% from 1.8%, and European Commissioner Olli Rehn warned of the risk of a new recession. Asian economies are also showing clear signs of slowing down. This is unfortunately at a time when the Euro debt crisis and struggling US economy are threatening to lead to another global recession. For example, China's GDP cooled for the third consecutive quarter this year to a growth of 9.1% YoY. As an indicator of slowing global demand growth in Chinese exports in September to the Eurozone, its biggest market, more than halved compared to August. India, the other giant in Asia is also facing an economic slowdown with GDP growth expected to slow to around 7% this fiscal year vs 8.5% last year. Hong Kong saw economic growth of 7% last year and is expected to grow at 5% this year. However,
Hong Kong Chief Executive Donald Tsang said that economic growth could shrink to as little as 2% in 2012. For Malaysia economists have cut their GDP growth for this year to 5.5%, after 7.2% recorded in 2010. Despite the cooling down, Asian economies are in better shape than 13 years ago at the time of the Asian economic crisis in 1998. Painful structural adjustments and robust economic growth since have helped. Ÿ Following a pattern of luxury brands
flocking to list in Hong Kong as a gateway to China, London-based jeweller Graff Diamonds plans to raise $ 1 bn in Hong Kong next year instead of London. Earlier this year Italian fashion house Prada listed in Hong Kong to raise brand awareness in China, the world's fastest growing luxury market. Graff has 33 stores worldwide and now wants to capitalise on strong demand for high value gems in China and India, despite a deteriorating global economic outlook. These two countries, together with the Gulf, are expected to overtake the US in the next four years as the biggest buyers of diamonds. Ÿ The BRIC countries seem to be happy
to support Europe's sovereign debt problem, but only through the IMF. The developing economies have a vested interest in preventing contagion from a European economic meltdown which may, through globalisation, lead to a broader global slowdown. But, with their own economies also slowing BRIC countries are wary of putting their hard earned reserves at risk. Some BRIC countries seek political concessions for any bailout. China wants the European Union to grant it market economy status, a long standing demand that would give Beijing better protection against anti-dumping trade actions. Beijing also wants the EU to lift an arms embargo imposed in 1989 after the Tiananmen Square protests. Ÿ BRIC
economies which have accumulated much higher international reserves than European and developed economies want to increase their influence over the IMF
Quality Times January 2012
which has always been dominated by wealthy nations. The IMF gets most of its resources from quotas paid by member nations and a number of bilateral and note purchase agreements. Bilateral agreements - in which the IMF is allowed to draw funds from a lender to a troubled country would be the fastest way to contain the fallout of the crisis. However, dominant shareholders of the IMF like the US and some European countries do not wish to embrace the idea of increasing the global lender's funding via bilateral deals as that would finally dilute their influence. Ÿ Below is an interesting table of latest
international reserve assets of Asian and some Western countries. China dominates with over $ 3 trillion or 31% of global reserves. The BRIC economies and Japan account for over half the world's reserves. Robust economic growth and sound policies have helped. La t es t I nt er na t ion al R e s er ve A s s e t s US$ Bn at 23 . 12 . 2 01 1
C ou nt ry
% of W or ld
W O R LD 10 , 28 4 T OT AL
A S I A: J a pa n
1, 2 25
11 . 9
T aiw a n S . 30 9
K o rea 28 2
3, 2 01
31 . 2
H on g K o ng S in ga po re
T ha ilan d M ala y s ia I n do ne s ia B R IC : C hin a R us s ia B ra z il I n dia W ES T : U SA
E u roz o ne * U K 57
* Deepak N. Lalwani, OBE, Director-India, Lalcap Ltd, London
* incl Germany $39bn, Italy $35bn and France $30 bn
Asia Economic Notes
Oligopolistic Markets And Collective Dominance * Enrico Adriano Raffaelli Introduction No one could doubt the benefit that competition brings not only to consumers but also to the economy as a whole, leading to a correct functioning of the market. Indeed, only competitive markets ensure efficient allocation of resources, adequate technological innovation, high quality products and fair price levels. Bearing this principle in mind, antitrust enforcers have always tried to remedy market scenarios that prevent competition from playing its fundamental role as "market regulator". This is typically the case of oligopolies, whereby undertakings are driven to reach a substantially anticompetitive equilibrium simply by the market structure. Therefore, both EU and National Antitrust Authorities ("NCAs") have attempted to address the "oligopoly problem" to restore adequate competitive conditions in the increasing number of oligopolistic markets in our globalised economy. As will be seen further on, different solutions have been reached, accompanied by an extensive debate among academics and professionals. The starting point of this Paper is the EU legal system, which has resorted to the conventional antitrust rules and the merger control regime, to address some of the main issues concerning oligopolistic markets. A cursory look at the outcome of the relevant EU decisional practice nevertheless suffices to highlight the weaknesses of the methods adopted so far and the need for further developments. It is therefore necessary to find a more effective solution to the "oligopoly problem" and, in the author's
view, useful hints may be drawn from the approaches adopted by some national legal systems. The Peculiar Features Of Oligopolistic Markets The first difficulty that arises from a discussion on oligopolistic markets is their definition . Oligopolies are typically depicted as involving a small number of undertakings on the supply-side, thus being a "halfway house" between a monopoly, where only one player supplies goods or services, and "perfect competition", wherein numerous differently-sized undertakings operate and efficiency on the market is maximized . However, it has been held that restricting the oligopoly problem to a numerical issue would be to "miss the correct target" . In fact, the very typical feature of oligopolistic markets lies in the interdependence of undertakings among themselves, so that each firm, in exercising its market power (basically, when it fixes its prices), takes others players' (certain or supposed) conduct into account and acknowledges that its choices will inevitably influence competitors' choices. In this scenario, competition risks to play a minimal or even no role, since, for instance, each oligopolist knows that any decision on lowering its prices (in order to try to increase its market share) would be followed by identical behaviour of its competitors and the price level would eventually decrease in the whole market, resulting in less profits for all oligopolists. Essentially, competition would damage each member of the oligopoly . Consequently, the achievement of an Quality Times January 2012
anticompetitive equilibrium, whereby undertakings are likely to profitably set prices at supra-competitive levels (or restrict output/quality of goods/services provided) without even communicating with each other, is encouraged by the very market structure and does not derive from an infringement of antitrust rules. As known, since the end of the eighteenth-century, various economic models were developed to explain the functioning of oligopolistic markets, firstly focusing on the typical results of the interdependence between members therein and, later, attempting to detect the factors that might favour "tacit collusion" , depicted as the typical dĂŠfaillance of oligopolistic markets . It is common knowledge that, notwithstanding the efforts made, the highly "unpredictable" nature of oligopolies has prevented any of the proposed economic models from successfully explaining the countless scenarios that may arise in such markets. Modern economic stud ies have nevertheless succeeded in evidencing the "inherent tension between competition and collusion within oligopolistic markets" and highlighting several factors which render "tacit collusion" likely, such as highlyconcentrated offer, market transparency, products' homogeneity, stagnating demand, high barriers to entry and weak or no potential competition . However, no uniform solutions were reached on which could be the most suitable tool to face the anticompetitive equilibrium that might characterise oligopolies, the main issue being how to prevent the market structure from impeding competition from playing its fundamental role.
The Different Instruments To Address The "oligopoly Problem” At EU level, the Commission has sought to address oligopolies (not expressly mentioned by the Rome Treaty), by enforcing antitrust rules concerning anticompetitive agreements/practices, abuse of dominance, as well as merger control. This, however, does not seem to have led to optimal results. Tacit Collusion And Prohibition Of Anticompetitive Agreements Initially, the Commission tried to apply prohibition of anticompetitive agreements/practices, currently under art. 101 TFEU , to "tacit collusion" in oligopolistic markets. In particular, an attempt was made to include oligopolists' parallel conduct in the scope of this provision, comparing it to concerted practices . Since Dyestuffs , the Court of Justice ("CJ") however outlined the difference between conscious parallelism and concerted practices, defining the latter as "a form of coordination between undertakings which …knowingly substitutes practical cooperation b e tw e e n th e m fo r th e ri sks o f competition" without a proper agreement being reached (§64). Thus, "parallel behaviour may not by itself be identified with a concerted practice", although it can be considered as strong evidence of the latter if "it leads to conditions of competition which do not correspond to the normal conditions of the market" (§66). It is nevertheless true that this judgment, confirming the Commission's finding of a concerted practice, mainly grounded on the fact that price increases, simultaneously applied by dyestuffs producers, could not have taken place without a previous collusion, left open the possibility that mere parallelism might be used by the Commission to challenge an infringement of art. 101TFEU. Subsequent case-law definitely solved this doubt, clarifying that antitrust law "does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors" . Thus, article 101 TFEU does not apply to conscious parallelism whenever it is the very market structure, i.e. oligopolistic interdependence, that can explain the analogous behaviour adopted by the undertakings concerned .
Therefore, article 101 soon proved to be useless to directly address the physiological aspects of the "oligopoly problem". However, the Commission, supported by EU Courts, has resorted to the provision at stake to prohibit agreements/practices that may alter/increase the normal transparency of the market, thus favouring coordination amongst oligopolists (s.c. facilitating practices) . Consequently, article 101 TFEU has been constantly applied to information exchanges which facilitate conscious adaptation of members of an oligopoly to the conduct of other members, thus prohibiting information exchanges otherwise lawful in nonoligopolistic markets . Whilst on the one hand, the strict approach adopted by EU antitrust enforcers towards facilitating practices leaves art. 101TFEU a role in addressing some behavioral aspects of the "oligopoly problem", on the other hand, the Commission nevertheless had to find other tools to effectively face the structural défaillance of this kind of market. Tacit Collusion And Collective Dominance Since, due to oligopolistic interdependence, undertakings are more likely to reach an anticompetitive equilibrium, characterised by higher prices or lower quality/technological progress than in perfectly competitive markets, the Commission has resorted to art. 102TFEU and collective dominance to address oligopolists' uniform conduct. Even if article 102 TFEU prohibits abuse of dominance by "one or more undertakings", the CJ initially denied that two or more independent undertakings could be jointly dominant, also outlining the difference between this situation and oligopolistic interdependence . Later, in Italian Flat Glass , the Commission applied for the first time the notion of collective dominance to three Italian producers of flat glass, stating that they "present themselves on the market as a single entity and not as individuals"(§79). The CFI (now General Court) was therefore given the possibility to pronounce itself about the boundaries of this concept . In particular, it was maintained that "there is nothing, in principle, to prevent two or more independent economic entities from being, on a specific market, united by
Quality Times January 2012
such economic links that, by virtue of that fact, together they hold a dominant position vis-à-vis the other operators on the same market" (§358). Any doubt on the possibility to apply art. 102TFEU to independent jointly dominant firms was therefore removed, but a high uncertainty remained on which "links" should subsist among the concerned undertakings to affirm their collective dominance . Immediately subsequent EU case-law did not clarify this point, simply recalling the definition provided in Italian Glass or sometimes speaking of the necessity of strong links conducing the undertakings to adopt the same conduct on the market . It was eventually in Compagnie Maritime Belge that the CJ seemed to overcome this position. In particular, the CJ focused on the fact that, to ascertain collective dominance, the concerned undertakings must "together constitute a collective entity vis-à-vis their competitors, their trading partners and consumers on a particular market" (§39). "Economic links or factors which give rise to a connection between the undertakings concerned" (§41) should be assessed, keeping in mind that "the existence of an agreement or of other links in law is not indispensable"(§45). Indeed, collective dominance may flow from "other connecting factors and would depend on an economic assessment and, in particular, on an assessment of the structure of the market in question" (§45). This judgment, however, left many questions unanswered. On the one hand, the CJ apparently intended to include mere oligopolistic interdependence amongst factors determining collective dominance (in line with the stance progressively adopted in the context of merger control, see infra) , but it did not exhaustively address this point, since the case at stake did not concern an oligopolistic market . On the other hand, even though it was remarked that a finding of collective dominance must "proceed upon an economic assessment of the position on the relevant market of the undertakings concerned, prior to any examination of the question whether those undertakings have abused their position on the market" (§38), the CJ, once Cewal's collective dominance was ascertained, qualified the latter’s exclusionary conduct as abusive rather simplistically, without adequately clarifying which behaviour by oligopolists
As regards the first issue, clarifications were provided by subsequent case-law, e.g. in Piau , removing any doubt on the possibility to ground collective dominance on mere oligopolistic tacit collusion . On the contrary, a high uncertainty remains on whether oligopolistic tacit collusion, leading to supra-competitive (but not excessive) prices, may per se trigger the application of article 102TFEU. The existing precedents, indeed, only deal with exclusionary abuses aimed at eliminating competitors from the market/preventing their entrance (e.g. Compagnie Maritime Belge and TACA). The more reasonable solution seems to lead to a negative answer, so as to avoid to punish oligopolists for simple rational conduct, dictated by the very structure of the market . Thus, even article 102 TFEU seems inappropriate to address the physiological défaillance of oligopolies. Tacit Collusion And Merger Control Shortly after its introduction in 1989, merger control has proved useful to address the "oligopoly problem", by preventing ex ante the creation/strengthening of oligopolistic market structures potentially favouring tacit collusion between undertakings operating therein. Indeed, even if no reference to collective dominance was made by Regulation 4064/1989 , it was soon clarified that also concentrations creating or strengthening a collective dominant position, thus significantly impeding an effective competition on the market, were to be prohibited . Thus, merger control has become important to test the notion of collective dominance and has enabled the Commission and EU Courts to further refine this concept, also for the benefit of enforcement of article 102. As seen, oligopolistic interdependence was recognised as a connecting factor sufficient to find collective dominance in Gencor, whereby the General Court included in "economic links" giving rise to collective dominance "the relationship of interdependence existing between the parties to a tight oligopoly within which, in a market with the appropriate characteristics…., those parties are in a position to anticipate one another's behaviour and are therefore strongly encouraged to align their conduct in the
market… such a way as to maximise their joint profits by restricting production with a view to increasing prices" (§276). It was also specified that, oligopolies are among the anticompetitive market structures that merger control is also aimed to prevent, whereby "each undertaking may become aware of common interests" and, in particular, is able to increase prices without engaging in anticompetitive practices (§277).
effective competition) or to keep coordinating their conduct in an easier way (§22). In particular, in explaining the criteria followed by the Commission in its prospective analysis of a horizontal concentration, the Guidelines refer to the creation/strengthening of a collective dominance position and to the three Airtours criteria, necessary to prove that a concentration is likely to lead to a sustainable coordination (§39-57).
This important principle was subsequently reaffirmed by the General Court in Airtours , the first case not dealing with a duopoly but a more "complex" oligopoly. The General Court, going even further than the statements in Gencor, clarified the conditions that must subsist to demonstrate that the creation/strengthening of a collective dominance caused by a concentration is capable of hindering competition. This occurs when the following criteria subsist (§62):
In the lack of precedents applying the SIEC test to concentrations involving oligopolistic markets, it can be argued, relying on the Guidelines, that principles developed so far by EU Courts continue to be valid and that, therefore, a transaction, destined to occur in an oligopolistic market, is likely to be prohibited when it would significantly impede effective competition, through the creation/strengthen of a collective dominant position in the Guidelines' terms.
market transparency, enabling each member of the dominant oligopoly to quickly and precisely know the conduct of the other members; Ÿ adequate retaliatory mechanisms, ensuring that tacit coordination is sustainable over time and incentivizing oligopolists not to depart from the common policy; Ÿ absence of reactions by current and potential competitors as well as consumers capable of jeopardizing common policy's results.
This conclusion does not seem to change even following Impala , whereby the Commission's decision, authorizing a joint-venture in the recorded music market, was firstly annulled by the General Court for the unconvincing arguments which had been used by the Commission to exclude the risk of the creation and strengthening of a collective dominance in the market at stake. Subsequently, the General Court's judgment was in turn quashed by the CJ , which took the occasion to pronounce itself on Airtours principles.
Two years after Airtours, EU merger control underwent several reforms, which led to the adoption of a new Merger Control Regulation (Reg. (EC) 139/2004 ). As known, the latter has inter alia substituted the previous "dominance test" with the "significant impediment of competition" (SIEC) test requiring an assessment on whether a proposed merger would lead to a significant impediment of effective competition, in particular by creating or strengthening a dominant position (art. 2).
In particular, while basically endorsing them, the CJ inter alia observed that "in applying those criteria, it is necessary to avoid a mechanical approach involving the separate verification of each of those criteria taken in isolation, while taking no account of the overall economic mechanism of a hypothetical tacit coordination."(§125).
Simultaneously, Guidelines on the Assessment of Horizontal Mergers were adopted, wherein one of the two main ways where horizontal mergers may significantly impede effective competition, is identified in s.c. coordinated effects, occurring whenever a change of the nature of competition enables firms to start coordinating and raising prices (or otherwise harming
Quality Times January 2012
may amount to abuse of collective dominance.
To sum up, ex ante control over tacit collusion granted by EU merger regulation seems to have reached a satisfactory level. However the drastic repercussions which the complex prospective analysis the Commission is called to carry out may have on business also as results from Airtours and Impala , cannot be ignored. Since a prospective assessment of a concentration will always be characterized by a certain d e g r e e o f u n c e r t a i n t y, f u r t h e r improvements in addressing the "oligopoly problem"
are necessary and it may be useful in this respect to draw a lesson from a cursory look at some different national approaches. A Comparative Perspective As seen, the main concerns arising from oligopolies relate to the structure of these markets, which may lead oligopolists to rationally reach an anticompetitive equilibrium in the absence of anticompetitive practices or abuse of collective dominance. Therefore articles 101/102 TFEU are of no use to address tacit collusion, whenever this is not accompanied by proper anticompetitive conduct, the only instrument remaining when possible - the ex ante control of mergers involving oligopolistic markets. Thus, in all remaining cases, there is a sort of paradox: antitrust rules cannot be applied, just to those markets wherein competition is lessened or rather absent due to the existence of a (collective) dominant position. In combating tacit collusion, many national legal systems risk to attain similar results to the EU, and these, as seen, are not completely satisfactory. Countries which have followed the EU's footsteps include Italy, whose antitrust regime mirrors the EU's , Germany , France and Austria .
On the contrary, the UK system deserves more attention in that it has combined the "traditional" approach, similar to the EU , with a very peculiar instrument, market investigations, which seems to provide the competent authorities with an innovative tool to effectively address an oligopoly's structural problems, whenever the Competition Act cannot be useful. In particular, pursuant to the Enterprise Act 2002, the Office for Fair Trading ("OFT") may make a reference to the Competition Commission ("CC") , if it has "reasonable grounds for suspecting that any feature.....of a market in the United Kingdom .....prevents, restricts or distorts competition..." . Once, following a preliminary inquiry, OFT decides to refer to CC , the latter carries out an in-depth examination and has the power to directly intervene on the market, ordering remedies if necessary .The outcome of the CC's investigation does not depend on prior violations of antitrust rules, thus significantly differing from the EU and other legal systems, and being able to address a broader spectrum of antitrust issues. By paying particular attention to structural features of a market, the UK approach seems to be particularly fitting to address oligopolistic market structures and collective dominance scenarios, which, as seen above, might otherwise not be caught by "conventional" antitrust rules .
Concluding Remarks The brief overview of how EU legal system has sought to address tacit collusion, together with subsequent remarks on other national systems, has highlighted the need for further improvements to the current approach to address the "oligopoly problem", which basically finds only in ex ante merger control an adequate tool to prevent the creation/strengthening of collusive market structures. A gap however remains with respect to all markets that are not scrutinized by the Commission in the context of merger control. A lesson may be learnt from the UK approach, which as seen allows the CC to directly intervene in oligopolies, remedying possible anticompetitive problems, regardless of the existence of antitrust violations. In the author's view, this could be the right way to follow not only in EU and EU-like systems but also in other countries', like India , which do not expressly address the oligopoly problem. This could help to avoid the risk that competition turns out to be useless just in those markets which necessitate it most. *Enrico Adriano Raffaelli Partner, Rucellai & Raffaelli, Milan, Italy
Continued from page14
under the Convention. Details of this will be taken forward in 2012. Conclusion With 195 Parties, the United Nations Framework Convention on Climate Change (UNFCCC) has near universal membership and is the parent treaty of the 1997 Kyoto Protocol. The Kyoto Protocol has been ratified by 193 of the UNFCCC Parties. Under the Protocol, 37 States, consisting of highly industrialized countries and countries undergoing the process of transition to a market economy, have legally binding emission limitation and reduction commitment. The ultimate objective of both treaties is to stabilize greenhouse gas
concentrations in the atmosphere at a level that will prevent dangerous human interference with the climate system. With regard to environmental effectiveness, many studies (including the just released "Bridging the Gap" report from UNEP) have pointed out the large gap between where emissions would be if the Copenhagen pledges ere implemented, and where emission needs to be in 2020 for the 20C target. Leading economists from different parts of the globe met at the World Bank on 11th July, 2011 and projected that the situation due to climate change has not deteriorated as badly as Prof. Nicholas Stern had projected in 2006.
The cost of mitigation of climate change effects would also be lower than what was projected in 2006. However, there is an urgent need to integrate science and economics while making policy projections. Taking only one route at a time, can be a dangerous approach, which will not be practical. The future course on climate change mitigation and adaptation will depend on individual actions by different countries as the globe is passing through serious economic turmoil and no developed country has surplus to serve the humanity in other developed economies. * Pradeep Chaturvedi is Vice President, Institute of Directos
Quality Times January 2012
ICAI bars 2 auditors linked with Satyam scam for life
News & Views Mularam, as he makes way for his push cart amid the chaos of cows, Boleros, bikes and open drains on Barmer's Station Road.
Two auditors involved in the multi-croreSatyam fraud have been barrred from attesting financial statements for life, apart from facing a financial penalty, by auditing regulator Institute of Chartered Accountants of India (ICAI). However, inquiry against top two audit partners of Price Waterhouse - S Gopalakrishnan and Srinivas Talluri - is yet to come to a conclusion. Chintapatla Ravindranath and P Siva Prasad - who worked for Lovelock & Lewes (an affiliate of Pricewaterhouse India) - were audit managers who performed the statutory financial audit of Satyam Computers between April 2001 to September 2008 on behalf of Pricewaterhouse India. The duo's names have been removed from the members' register of ICAI permanently, which means they cannot attest financial statements for life. Also they have been slapped with a financial penalty of Rs 5 lakh each, which is the maximum penalty permissible under law. Sources say this is perhaps the first time when the action involves both permanent de-rostering and also a financial penalty. The CA institute's disciplinary committee had met on Monday to consider the matter. The committee, that had also heard the accused, found "serious gross negligence" on the part of the two CAs in the discharge of their duties as audit team members. Siva Prasad had conducted the audit from April 2001 to March 2005, while Ravindranath had performed it from April 2005 to September 2008. Both were employed with Lovelock & Lewes, Kolkata, and deputed to carry out the audit in the name of Price Waterhouse, Bangalore. The hearing in the matter of other respondents who were heading the team - Gopalakrishnan and Talluri - and Satyam's ex-CFO V Srinivas are yet to be concluded. The same is the position in the case against VS Prabhakara Gupta, ex-internal audit head of Satyam. Sources said the delay was because they were in judicial custody for a long time and thus could not be questioned. Also, some of them had gone to court challenging ICAI's disciplinary proceedings against them. ICAI now plans to resume disciplinary proceedings against all the other accused auditors this month, sources said. However, it will have to wait to do the same against Gupta who has got a stay from the Andhra Pradesh High Court. Overnight crorepatis sprout in Barmer sands Mularam has learnt quickly how to fend off the pushy and persistent insurance agents. But his worries don't end there. Becoming an overnight crorepati hasn't been easy for this street vendor. His ancestral house amid the sprawling Bajra fields stretching across 20 acres, where he and his generations lived for decades, will be razed for industrial use in six months or so. His family has already received a little more than Rs 1 crore for around 40 bighas. "We have become ghosts - no place to live. Nobody understands this, everybody is curious about my money," says an irritated
Such grumblings, though not rare, are far and few. Farming is a dead-end job in this sandy, and barren backwaters of Rajasthan. People here own land in hundreds of acres and usually wait four years to have a Bajra crop like this year, given the harsh topography of the Thar desert. Like water, prosperity has no address in this arid, land-locked region. Of late, the sands seem to be shifting here as well. The doublebarrel bang from Cairn India andJSW Energy has jolted the sleepy town out of its deep slumber, creating around 750 crorepatis out of people like Mularam, most of who don't have bank accounts, education and access to water and electricity. Before Cairn India found oil, the value of land, sort of, depended on the buyer's benevolence, fetching around Rs 10,000 per acre. But that's history now after the discovery of oil reserves. The British oil company has acquired around 3,000 acres for drilling and development of the fields, coughing up rates as high as Rs 4 lakh per acre. JSW Energy, which is half way through its 1,080 megawatt power plant, has acquired about 17,000 acres. Most of land is being used to mine lignite to fire up the plant. The company has put Rs 1,000 crore in the hands of the farmers, stumping up close to Rs 7 lakh per acre. Some of this instant money has found its way into the realty market, jacking up housing prices by more than 10 times in Barmer town in last three years. While Mularam is still looking for cheap land, many who sold at Rs 4 lakh per acre, have bought equal quantity elsewhere in the region at much cheaper rates, leaving them with enough cash and freedom to splurge on SUVs, TVs, ACs refrigerators, washing machines, and trips to Goa. Mahindra and Mahindra says Rajasthan is the fourth largest market for its Bolero in country. It is close to setting up a dealership outlet, a first for any carmaker in Barmer. The district transport officer Anup Choudhary says car sales have doubled in last three years from 766 to 1423 units with Bolero, Scorpio, and Innova leading the charge. Some even travel as far as Haryana, Delhi, Ahmedabad to drive home a vehicle on the same day. Many prefer to pay the entire cost at one-go. Banks have also jumped on to the bandwagon. Now, almost all lenders have set up shops. Even insurance agents have had a share of the pie. LIC agent Devendra Kumar says that a farmer, who got Rs 7 crore, made a one-time payment of Rs 1 crore for the insurance of his family members. Barmer, which had only one hotel in 2005, is now home to 20 properties. More are under construction. A resort on the outskirts is waiting in the wings. The boom is on the boil despite a couple of hotels, which were bursting at seams a year ago, closed their doors after 15,000 workers of L&T, which was constructing Cairn India's facility, left the town. What is preventing a burst is the prospect of a refinery.
Quality Times January 2012
While industrialization has lifted many out of poverty and created fresh revenue streams for the state government, availability of basic infrastructure in this town of crorepatis seems miles away. The only hospital in the district headquarters doesn't have a CT scan machine. Rakesh Pachuri, a professor in the local college, says the state government is earning Rs 5 crore per day as royalty and cess from Cairn but it has never bothered for the development. Barmer town has no parks, only one internet cafe, and no restaurants but foreign liquor shops have mushroomed recently. When oil was discovered, the-then chief minister Vasundhara Raje promised to make Barmer theDubai of India. Now that looks a case of building castles in the sand. What Barmer needs is schools with teachers, where Mularam's six kids can get access to basic education so as not to be reduced to daily labourers in Surat or Uttar Pradesh.
This, in turn, helped the company create value-added products like Aashirvaad atta. Several studies have shown that the price dispersions that existed between mandis shrank wherever eChoupal was set up.
ITC readies model for brand Choupal evolution
But today, price discovery is not the sole preserve of ITC in an inter-connected world bursting with information. ITC is sieving through several ideas which will ensure that Choupal remains relevant with the changing times. This is when ITC decided to get into the agri advisory business. It then studied the possibility of agricultural extensions and explored rural employment projects.
ITC is refreshing the storyboard for e-Choupal. The decade-old initiative, one of the largest Internet-based interventions in rural India that helps farmers with better income for their produce, wants to innovate its business model as the rapidly improving wireless communication makes individual farmers more savvy with price discovery mechanisms.
"It should be a business which touches a large number of people. Another business is ecotourism. But how many villages lend themselves for this kind of activity. It's a potential business option for a later date. One characteristic is that the business model should create sufficient revenues to pay for the cost of infrastructure that is laid to build that business," said Sivakumar.
Now operating in 40,000 villages across 16 states, e-Choupal created an urban-rural transaction highway for agri commodities, credit, insurance, consumer goods and even fourwheelers. ITC is strategizing its next evolution. So what is next?
However, with rural markets and consumption patterns themselves undergoing a change, how relevant will e-Coupal be?
The diversified conglomerate, valued at over $30 billion in stock market, is building rural manpower skills, a sort of youth employment exchange; advisory business in agri commodities; community driven eco-tourism projects and is even exploring a model for selling fresh fruits and vegetables in the cities. Some of these could emerge as the anchor business with a few rider businesses for support. What's got ITC geared into putting e-Choupal through a process of constant innovation is a key learning that business models need to be least vulnerable to market distortions created by government action. e-Choupal's expansion was frozen after the government, in its bid to fight inflation, rolled back certain reforms in APMC (Agriculture Produce Marketing Committee) Act and Essential Commodities Act. Although e-Choupal further deepened its network within existing villages of operations, ITC decided against making fresh investments to expand the model to newer villages. It had a target of reaching 100,000 villages. The cigarette-to-hotels conglomerate is now striving to ensure brand 'Choupal' is well leveraged and meets certain basic goals as it continues to evolve. "There are two aspects to our vision for e-Choupal. One, it is a platform that connects rural India to the rest of the world. It's a
two-way transaction flow-whether you are sourcing agricultural commodities, or connecting employable youth to marketsbetween rural and urban. The second dimension is it is focused on delivering a triple bottomline outcome," S Sivakumar, chief executive, agri business, ITC, told TOI. e-Choupal originated with the idea of making Indian agriculture globally competitive and self sufficient. The idea was to put more money into the hands of farmers with efficient price discovery mechanism and cost reduction in the sourcing process.
"That's the kind of evolution we are talking about. From agriculture commodities to rural youth getting employed, it is a continuum which is evolving. The idea is to be relevant to the market place, to fill certain institutional voids. As infrastructure improves and institutions come into place, such voids will not be there. These will morph into something else. When connectivity becomes good, the kind of transaction we are conducting is different from what we did 10 years ago. So we disengage from that activity and move into newer activities. Interestingly, there are emerging economies in the global context and emerging rural markets will leapfrog. Thus at any point the number of experiments we conduct need to scale up. Each is relevant for a particular kind of market situation. It has to evolve and that's how we are designing the business model," said Sivakumar. When ITC started piloting Choupal Fresh in Hyderabad a year ago, it was a model to deliver fresh fruits and vegetables to consumers and institutions based on demand, mitigating chances of value reduction for the farmer or surplus or shortage situation leading to price volatility. The model ITC created is based on demand forecasting. Whatever is produced, gets consumed. It has worked well in Hyderabad. Will it be scaled up to other cities as well? ITC will take a call on this next year.
Quality Times January 2012
The Making of an Entrepreneur If it were simple to become a millionaire, there'd be more of them. And while there are no set guidelines on how to be a good e n t r e p r e n e u r, t h e r e a r e c e r t a i n characteristic qualities that are required to make a success of your business. Many of you may already have these qualities, but probably you might need to develop the same in others. In short, an entrepreneur needs to be able to determine his weaknesses and find ways to eliminate them by becoming stronger in those areas. If that's just a basic aspect of an entrepreneur, here are more that goes to make on successful in his entrepreneurial venture. Delusion and silver lining: All entrepreneurs truly believe that they can change the world - that his billion-dollar business plan is truly achievable- that the business plan reflects reality - the truth is out there somewhere and he will be the first to find it. He is mostly wrong. But in his pure optimism, unrestrained confidence and inaccurate data lies the secret to his success. As an entrepreneur, he will ride over his mistakes and delusion, learn from his experience till the silver lining shows. In the beginning, it's better to think big than to think small. A man of character: Some characteristics of a good entrepreneur include determination, intelligence, and the ability to think outside the box. These characteristics help any good entrepreneur think of possibilities, find a place to fill, and see the business through tough times as well as good times. A good entrepreneur also has the characteristic of running their business as easily as possible. And yes, to be an entrepreneur, you are expected recognize a genuine opportunity when you come across one. Being Stubborn: The difference between owner of a firm and managers is
that an owner is stubborn about idea behind the business and work towards that. Managers, on the other hand , opt to change the idea when things don't work. The trick to be a good entrepreneur is to know when to be stubborn and when to be flexible - be obstinate about the vision, but flexible about tactics. For instance, you can be flexible about reducing costs, but you don't change your vision to reduce costs. Setting Goal for Success: Many entrepreneurs finds it difficult to get past the planning stages of starting a business. This is because with all the planning, there was never a clear goal for the entrepreneur to reach. It is easier to get to where you want to be if you know where you are going in the first place. Having clear, defined 'finish line' helps you move forward and put your plan into action. Write down your thoughts in a business journal. Make it your goal. Then create action plan on how to achieve to your goals. Allow rewards and schedule time: Have the least amount of unscheduled time each day. In other words, try to schedule every hour of your working day. This is one of the productive tools for successful entrepreneurs at initial stages. Also, allow yourself rewards at every stage of your achievement. Far off goals tend not to motivate us. Close goals, that we can see, and awards on being successful, tend be a lot more motivational.
Managing business the right way: Business management is crucial as you develop yourself as an entrepreneur. Successful business management is much more than struggling through a 'to do' list on daily basis. Good business management focuses on developing calculated systems to ensure that you and your staff can get things done quickly , efficiently, in a predictable, structured and cost-effectively way. Innovate and build relationships: Selling a product does not make you an entrepreneur. Selling an innovative product make you one . An original product cuts the competition. With this, an entrepreneur no longer needs to worry about his competitors, for he is going to pioneer a certain niche. And that's not all. Customer loyalty is another important aspect of entrepreneurship. You will only earn profit if your customer are with you. Build a pleasant relationship with end users of your product of service by asking for their needs, opinions, feedback and addressing all of these issues. Primary Characteristics: The primary characteristics of a successful entrepreneur include: Ÿ Ability to set goals Ÿ Ability to maximize opportunities Ÿ Full knowledge of business and
competitors A good time-manager: Entrepreneurs have to be good in time management. Each day there are a number of tasks that reaches an entrepreneur for completion. As such, time management is important to accomplish their tasks quite fast if they priorities and manage time well.
Quality Times January 2012
Ÿ Ability to budget and manage finances Ÿ Recognise a genuine opportunity Ÿ Knowledge of personal strengths and
Board Intelligence * Pippa Croney Ever since the dramatic market events of 2008, the way companies are run and the way boards function has become a hot topic of debate amongst directors, commentators, regulators, investors and the general public. Scrutiny has, quite rightly, been placed on the competence and the diversity of the people appointed to PLC boards, but another critical determinant of an effective board has been largely overlooked: the information board members receive from the executive with which they do their job. Boards exist to supervise and steward, but their effectiveness depends on the scope and quality of the information they receive. The monthly information pack provided to the board is one of the key communication channels between the executive and non-executive (NED), yet our research and experience has shown that the scope and quality of this information is often inadequate. Board directors share the responsibility for board decisions and strategic direction. But with limited access to the right information, it is difficult for NEDs to fulfil their role. Highly skilled and experienced NEDs are not enough if the information they receive is of poor quality. We believe that improving the quality of information available to corporate boards is one of the most powerful ways of improving board effectiveness. Wellinformed directors are far better placed to add value and high quality board information can help overcome the inherent information asymmetry at the heart of corporate governance. We would like to see a demonstration of best practice in this area incorporated within Corporate Governance Codes. We have outlined below the impact of information on the effectiveness of a board, why current board materials are often found wanting and what can be done to improve the quality of information
reaching our boardrooms. The Importance Of Effective Board Materials Boards provide supervision and stewardship as well as independent insight and specialist expertise. However, one cannot expect the challenging questions and well-informed decisions that are required of directors, without first providing them with an adequate picture of events. NEDs have limited time and resources to obtain information beyond what they receive from the executive so the importance of the board information pack should not be underestimated. As the principal briefing tool and the stimulus for debate at board meetings, a carefully constructed and coherent board pack is thus fundamental to an effective board. The board pack is the main timely source of company and sector insight for many directors and it also shapes the board's focus and agenda. A good pack will allow directors to arrive at meetings fully prepared to debate the things that matter and add real value to the business. On the other hand, a poor pack will leave them hamstrung. The Challenges Of Producing Effective Board Materials At Board Intelligence we specialise in developing highly effective board materials. Our experience has shown that, despite their importance, high quality board papers are surprisingly rare. Board packs have a habit of growing with every year that passes and contributors to the pack are numerous with no overarching control. The pack becomes bloated and cumbersome and whilst some individual reports may be excellent, others in the pack can be virtually unreadable, riddled with legacy
Quality Times January 2012
information, duplication and poorly explained charts and tables. This is, perhaps, not surprising when one considers the difficulties involved in creating a truly effective pack. Firstly, executives are busy running the company and finding someone with the appropriate perspective and skillset to do justice to the task is not easy. Tying everything together into a coherent story requires a birds-eye perspective of the business the sort of holistic view to which only the chief executive within the business tends to be privy. Furthermore, a report on the entire business has many stakeholders, ranging from the board to the individuals responsible for contributing to the pack. All will have their own views on what constitutes important, board level information and achieving change on a meaningful scale will require buy in from the majority of these stakeholders. Even with the will, resources and support in place to implement a change, the question as to what really constitutes effective board materials has not been made clear. Little guidance can be garnered from the UK Corporate Governance Code which provides the open ended statement that: "the board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties" leaving many companies to 'go it alone', with no way of knowing what best practice looks like. Our experience is that board packs are often almost entirely made up of backward-looking financial data and that forward-looking performance indicators and strategic issues are underrepresented. This focus on retrospective internal matters within the board pack has an inevitable impact on the content of the discussion that ensues within the boardroom.
A pack should exist to tell the clearest and most concise possible story of the company's state of affairs and likely future outlook verses plan, allowing directors, executive and non-executive alike, to spend more of their time discussing how to improve the business and its outlook. It will mean more informed strategic debate and more productive board meetings. Both the executive and non-executive will benefit from better materials and debate, and ultimately it will allow the business to reap the full value of the talented people it has recruited for its board. Creating Better Board Materials We have consulted over 25% of the FTSE 100 and FTSE 250 on their board materials. Through this experience we have outlined some of the most common problems and ways to improve the materials, to generate considerable benefit for a company. In this paper we have focussed on common development areas for board materials, rather than the difficulties associated with implementing change, and have categorised our findings into four sections: Structure, Scale, Scope, and Systems. Structure A high quality board pack should follow a consistent structure that does not change month on month. Rather than dotting nonstanding items throughout the report, they should be sat at the back where they can be accessed for a more detailed look without interrupting the overall flow of the regular report. The regular reports should not read like a presentation that make no sense without narration. They should be self-contained as well as together telling a holistic story of last quarter's performance. A board pack that shows a clear picture of performance over time can help build trust between the executive and non executive and keep the board working together for the benefit of the business.
The structure of the pack should make it easy for the reader to piece together a clear picture and to understand which parts of the business are driving performance. A board pack should be structured in a logical and intuitive manner with tabs and trackers that make the structure explicit and help readers navigate and know where they are, so they can quickly and easily grasp the key points. The pack should also include a short introductory note from the chairman stating what he or she wants the directors to be thinking about as they read the papers and prepare for the meeting. An executive summary supported by a dashboard of key performance indicators will deliver the key messages that the reader can expect the pack to expand upon in the more detailed monthly performance analysis. Each page should tell a story, with commentary supporting the data provided, which draws out key insights and indicates planned responses. The data should not be buried at the back of the pack - it should sit adjacent to the table or chart to which it relates, so that its points remain 'live' to the reader as they read. Data should never be presented without a target or indication as to whether performance is good or bad. A Red, Amber, Green (RAG) approach can help directors to see at a glance what the key messages are in the data and will allow them to better able focus their attention on the important issues at hand. Scale Concise is the magic word here. The reporting of financial data may be essential, but board packs tend to include so much of this sort of data that half of it is of hardly any use. In order to trim the pack down and make it more manageable, each contributor should answer a specific question: 'What does my report intend to tell the reader?' The answer to this is key. It will avoid any temptation to 'data dump' and quickly show just how much operational detail can be slotted into an appendix, or removed altogether, and will result in a board pack that's far more engaging, more strategic and, crucially for timepressed executives, shorter. Information can often be visually presented in a more concise manner than is frequently realised. We would challenge whether reading a board pack over 150 pages is
Quality Times January 2012
an effective use of director time and whether creating such a document is an effective use of the secretariat's time. Scope In our experience, many boards of the UK's largest organisations spend far too much time immersed in retrospective financial information and far too little time challenging what the future may hold and where the threats and opportunities will come from in the medium-long term. A contributing factor to this situation is the board pack that board members receive as a stimulus prior to a board meeting which are too often almost entirely made up of backward-looking financial data with forward-looking and strategic issues greatly under-represented. This focus on retrospective and internal matters within the board pack has an inevitable impact on the content of the discussion that ensues within the boardroom.
Clearly there is no one size fits all solution: each company will have its own unique set of concerns that need to be reflected in its pack. A growing company, for example, needs to emphasise strategy and organisation, while, one managing a crisis should focus on operational data and customer support. Yet whatever the fortunes of the business, the purpose of a high quality pack and the standards required remain the same.
The reporting of financial data is undoubtedly central to the supervisory role of boards, but it is often overrepresented. The stewardship role required of the board should involve the consideration of more forward-looking strategic information; it demands considering the question 'how is the company performing against longer-term strategic aims?' Board packs should provide better quality insights by showing where you're really heading, not just how you've done. A forward-looking board pack that promotes a long-term focus contains more than retrospective financial data. In line with the balanced scorecard philosophy, the finance report should be balanced by reports on the internal drivers of financial performance, such as customer satisfaction, personnel attrition, productivity, product pipeline, and other operational indicators. These will often provide greater insight into the future prospects of a business, rather than just the previous period's financial results. Equally important is the external operating environment. A summary of developments in the customer base, supplier/distributor dynamics, the competitor landscape and the regulatory environment should be an integral part of a quality board pack as they all provide an indication of opportunities and threats on the horizon. Awareness of risks facing the business should therefore feature throughout a quality board pack, but there should also
be a regular risk report providing a comprehensive account of major risks to the business and the actions being taken to mitigate them. None of these features need to mean an unwieldy board pack. By focusing on the business drivers and avoiding a data overload, you open up space to look at the bigger picture and the question of how the company is performing against its longer-term strategic aims. The board pack should include this breadth and be under 150 pages. Systems A tech-savvy approach can boost both the presentation of the board pack and make it easier for directors to read. Digital board packs can have extra functionality, including better navigation, data drilldowns and clickable charts and tables that enlarge the image and reveal the data beneath it for more in-depth analysis. It can be carried around on an iPad and read on the train or plane without impinging on security. An online board portal can be used to provide access to the raw data for those directors that wish to view it and can include interactive functionality which could help increase communication between board members and the executive outside of board meetings. Ideas can be shared and questions raised in a secure online environment before the board meeting, which further fuels the strategic debate. The benefits are not just limited to the directors either. A digital pack and online board portal can help improve the production and distribution of board packs, automating the data production element of monthly reporting and therefore reducing the burden on management to produce the pack. The
complication process can also be automated to ensure the company secretary is not spending hours chasing contributors, before printing, binding and couriering the document.
Below are our top 10 tips for how to improve board materials to start companies on the journey of creating a more effective board:
Conclusion 10 tips for creating dynamic board packs What should a director expect to get from a board pack? Fundamentally, the board pack should act as a pre-read for board members, and support their roles as both supervisor and steward. It should allow them to see how the business has fared in the past, in matters both financial and non-financial, as well as how well their agreed strategy is guiding them towards their goals. Finally it should spark debate and steer board members towards good decisions. What it shouldn't do is leave the team wasting half the meeting going through the material together, because they couldn't summon the inner strength to wade through it alone beforehand. No page should be unturned in a truly effective pack and every page should be readable, insightful and stimulating. Quality board materials will make your board more productive and lead to more informed decisions, as well as bringing them into line with best practice governance standards, as set out in the UK Corporate Governance Code and FRC Guidance on Board Effectiveness. Debate will become more informed and more strategic, striking the right balance between short and long-term considerations; and your executives and non-executives will have made more efficient, effective use of their time. A streamlined and effective pack transforms a board's ability to communicate the subjects and issues that matter most to directors, providing a valuable tool to both executive and nonexecutive directors alike, enabling them to make better decisions.
Ÿ Create a coherent narrative. Each
page should tell a story, and form a logical part of the wider whole. Ÿ Consider what questions you are
trying to answer for the reader, to help you decide what data is really important. Ÿ Use tabs and trackers to make the
structure explicit and help readers know where they are. Ÿ Keep it short. Ÿ Don't include every detail every month
- make sparing use of 'deep dives' and exception reporting, so that such information has more impact when it is included. Ÿ Include commentary next to every
table and graphic, so that directors can easily extract the 'so what'. Ÿ Look forward, as well as back. Ÿ Go beyond the numbers, to include a
wider picture of the health of the business. Ÿ Aim for snappy and effective, not
overbearing and sluggish. Ÿ Consider cloud hosting. Ease the
burden of distribution by providing access to a secure online portal, to download both a print copy and digital board pack. *Pippa Croney, Director HM Treasury, held a strategy position at Russell Investments.
Environmental Performance Index A report on Environmental Performance Index (EPI), 2010 has been produced by a team of experts from the Yale centre for Environmental Law and Policy, Yale University, in Columbia. The EPI ranks 163 countries on 25 performance indicators tracked across 10 policy categories covering both environmental public health and ecosystem vitality. These indicators provide a gauge at a national government scale indicating how close countries are with regard to established environmental policy goals. India’s EPI rank is 123 with EPI score of 48.3. Notwithstanding the above fact, the relatively lower rank of India appears to be due to its huge population which exerts immense pressure on the environment. Moreover, the analysis of the policy drivers underlying the 2010 ranking suggests that income is a major determinant of environmental success. The factors responsible for pollution in India have already been recognized. The Government have formulated sector-specific action plans to combat with the pollution problems. The important steps taken, inter alia, include; (i) Formulation of regulation /statutes to address sectors-specific problems. (ii) Setting up of regulatory/ statutory bodies for enforcement of environmental laws (iii) Setting up of monitoring network for assessment of water and ambient air quality as well as for noise. (iv) Action plans implemented to treat municipal waste (sewage and solid) under the various centrally sponsored schemes (v) Creating infrastructure for industrial pollution control incorporating cleaner production processes, setting up of common waste management facilities. (vi ) Execution of source apportionment studies in cities (carried out in 6 cities) and action plans for restoration of air quality in cities and towns.
Quality Times January 2012
Golden Peacock Awards A Strategic tool to Lead the Competition
Rt Hon’ble Mark Hoban, Financial Secretary to Her Majesty's Treasury along with Rt Hon Baroness Hanham CBE, Parliamentary Under Secretary of State at the Department for Communities and Local Government & Dr Ola Ullsten, former Prime Minister of Sweden presenting the Golden Peacock Awards on 13 Oct 2011 during the IoD’s Global Convention in London Guests of Honour at the Global Convention in London
Lord Khalid Hameed CBE DL House of Lords
Shailesh Vara MP House of Lords
Lord Tariq Ahmad of Wimbledon House of Lords
Lord Karan Billimoria CBE DL House of Lords
Vindi Banga Sr Partner, Clayton Dubilier & Rice
Dr. Ola Ullsten former Prime Minister of Sweden
Ernst R. Ligteringen Chief Executive, GRI
Sunil A. Misser CEO, AccountAbility
Are you looking for
Golden Peacock Award for Corporate Social Responsibility (GPACSR) Golden Peacock Global Award for Corporate Social Responsibility (GPGACSR)
Guidelines and Application forms can be downloaded from www.goldenpeacockawards.com Awards will be presented during the DUBAI GLOBAL CONVENTION 2012 being held on 25-26 April, 2012
SEAL OF APPROVAL for your better performance
DON’T MISS THE NEXT ROUND Last date
28 February 2012
Golden Peacock Awards Secretariat IOD House M-52 (Market), Greater Kailash Part - II, New Delhi-110048, India Tel: 011 - 41636717, 41636294, 41008704 Email: email@example.com
Do you have skills to be an ASSESSOR for the above Golden Peacock Awards? if so, please send your profile to us Instituted by
Rt Hon Baroness Usha Parashar CBE House of Lords
Alok Sharma MP for Reading West Rt Hon Baroness Verma House of Lords Minister for Universities, Women& Equalities
HE Kamalesh Sharma Commonwealth Secretary-General
Same as Earlier Paid Ad
Owned Printed and published by J.S. Ahluwalia, printed at Maximus Packers. 49-DSIDC Okhla Phase-I, New Delhi and published at M-52 (Market), Greater Kailash-II, New Delhi - 110048 Editor J.S Ahluwalia