I know, I know, I will be vilified, railed against and called a Government stooge by anybody who reads the header for this blog. But I request patience and a thorough reading of the complete blog before branding (with hot iron :) me.
When the campaign for the anti-corruption Lokpal Bill was launched with the Gandhi Crusader (though many still doubt the Gandhi credentials) Anna Hazare sitting on a fast to death, the people lapped it up, being fed up with daily exposes of corruption scams, one bigger than the other (Commonwealth Games scam of US $ 20 billion, 2G Telecom Scandal of US $ 50 billion etc.). The media too got into the act and their was frenzied reporting across TV channels, Newspapers, Magazines, social media: you name a place and you had massive coverage!!!
This came as a bolt from the blue for the government that already reeling under attack for the various scams. Talks on the net and in the media turned the "civil society movement" into a mass movement and evoked images of a popular revolt like in Egypt, which was still fresh in everybody's memory (did I say everybody ....... here I err as everybody did and I will explain later how). All of this sent the government bending backwards to accommodate the Civil Society. Soon announcements were made that a joint drafting committee, comprising members from the Civil Society and the Government, was being set up to discuss and suggest a bill in a time based manner.
There were cheers all around and it was hailed as a great PR victory and perhaps one day would have served as a case study across Business Schools. So far so good.
But here is where the script started taking a turn. The Civil Society Leaders were not prepared for such a cave in and the question of whom to appoint on the Lokpal Draft Committee became a contentious issue. When the nominations were made the choice of father - son Bhushan duo drew incredulous howls from even the most ardent followers of the movement. The Government was quick to seize the opportunity and while it started engaging in meetings of the draft committee, it also started a slanderous campaign against the civil society members of the draft committee. The result was that the focus of the medial and the civil society shifted from the core issue of the Lokpal bill draft and onto the civil society members trying to counter the slanderous campaigns.
The PR managers of the Government, having tasted blood, fired their next volley. The government representatives of the draft committee started engaging in an abusive mud-slinging match with the Civil Society Leaders. Here the movement committed its next and perhaps the biggest mistake. They engaged in a "tit for tat" mud slinging match with the Government.
This battle for media bites became so shrill that everything else was drowned in its cacophony. This is what the Government wanted, and the end result today is that the Government says it will not bow down to pressure from the Civil Society movement and the Civil Society is threatening another fast unto death. Will the Civil Society succeed? It is a big question and only time will provide us with an answer, but on the face of it, it looks like the battle has been lost by the Civil Society.
Where did the Civil Society Movement err??? Let us do a dispassionate analysis. They launched a brilliant Campaign and succeeded in getting the sound bites required, but the campaign was fundamentally flawed and ignored the basic tenets of PR. When you begin a PR campaign the first thing that you do is: the timing - this is very important; then you identify the target groups - here the Government and the people of India; Once the TG is established you identify the pressure points of the TG; then you identify the influencers who have the capacity to act on these pressure points.
This is where the PR managers of the Civil Society erred. The first and the basic error was the timing - there is still more than two years to go for a General Election. While they correctly identified their Target Group, they failed to properly identify the pressure points and the influencers. The other flaw was that it looks like more spur of the moment activity rather than a well thought out process.
When I say they were correct in identifying their TG it means they correctly identified the Government and the people. While their first PR moves had the Government on the ropes - the reason was that they and the Government alike thought that the bites were covering everybody - and this was a mass movement. While the Civil Society believed and still continues to believe that this is a mass movement, the government quickly realised that this was not. The facts in India are that 70% of the population lives in Rural Areas and they are the ones who come out and vote in large numbers. While the urban population, that has all the visibility, largely engages in monologues and when it comes to action like voting, abstains.
This realisation of the Government has turned into a self belief. Another thing cementing this belief is that the elections are still a long way off and with the voters' tendency to have short memories, the government and its mandarins are safe into thinking that when the elections come this will be another non-issue. The Civil society has made its biggest error in not taking the movement to the villages, all the voice that one hears and all the leaders are urban. Is there one Rural Leader amongst the Civil Society Members who can be identified?
The leaders of the movement, should have avoided the mud-slinging match with the government and then this would not have backfired. The belief that media coverage is the end to the means is a basic mistake. They must realise that media coverage is just a tool, though a very potent one, but still a tool. Where is the connect with the "AAM AADMI" - the common man. Even if the connect is there, they have hardly managed to show it. How many rural demonstrations in favour of the bill have happened? How many people from the villages have participated? How many of them have understood what the bill stands for?
For the rural population struggling to eke out a living where it can get food for two times, Government schemes like NREGS make more sense and they see the government in that light.The promise of UID and the expectations that it will give them more money earmarked for them, makes more sense. For them media coverage and us shouting from the cocoons of our air-conditioned offices onto social media, does not make sense.
It is here that the Civil Society lost its plot. They haven't yet realised that to make the Lokpal Bill a reality, in the way they want it, they have to influence the biggest constituency of the Government - the rural population. Had the timing been 2013 -14, the pressure would have added up. But now the government is secure in its belief that its biggest pressure points - the rural population and the elections are not being affected.
This may yet end up as a case study in Business Schools, but not as a successful PR campaign for the Civil Society, but as a failed PR campaign that began with a lot of promise.
Monday, June 27, 2011
Tuesday, June 21, 2011
Stocks fall like Nine Pins:
The recent action on the Indian stock markets, where stocks like GTL lost 70% market capitalsation in a single day again, showed investors the peril of over leveraging by promoters.
Over leveraging here involves the promoter share holding being pledged to financers as security against loans availed from them. The problem is fundamental here, in the sense that unscrupulous promoters by this mechanism are able to pledge their shareholding and are able to use the money as they want for their personal use and not necessarily for the use of the company.
The mechanism is simple - say a promoter starts a venture with Rs.500 million divided into 50 million shares of Rs.10 each. In three years time, he builds a so called sustainable business around which he creates a hype and drives the share price to Rs.500 per share by listing the company and holding say 70% of the shares. His valuation is now worth Rs.17,500 million which is 35 times his initial investment. Considering that a financer is going to charge a margin of 50%, his worth becomes 8,750 million and even if he pledges 10%, he takes home Rs.875 million. This will cover his initial investment of Rs.500 million plus the costs involved in driving the price to Rs.500 per share. The beauty is that when he pledges another say 10% and takes home another Rs.875 million, he is suddenly not concerned about what the company is doing. Even if the company now goes down, he has still made a cool Rs.875 million on an investment of Rs.500 million in three years.
I am not for a moment saying that all promoters are like that, but separating the scrupulous from the unscrupulous is very difficult in India, given the lack of regulations governing the promoter shareholding.
Unless SEBI wakes up to the reality and brings tough norms to regulate how the funds from pledged promoter shareholding can be used, many a unscrupulous and scrupulous promoters may be tempted to adopt the above mechanism and loot the Investors for their own personal benefit.
Over leveraging here involves the promoter share holding being pledged to financers as security against loans availed from them. The problem is fundamental here, in the sense that unscrupulous promoters by this mechanism are able to pledge their shareholding and are able to use the money as they want for their personal use and not necessarily for the use of the company.
The mechanism is simple - say a promoter starts a venture with Rs.500 million divided into 50 million shares of Rs.10 each. In three years time, he builds a so called sustainable business around which he creates a hype and drives the share price to Rs.500 per share by listing the company and holding say 70% of the shares. His valuation is now worth Rs.17,500 million which is 35 times his initial investment. Considering that a financer is going to charge a margin of 50%, his worth becomes 8,750 million and even if he pledges 10%, he takes home Rs.875 million. This will cover his initial investment of Rs.500 million plus the costs involved in driving the price to Rs.500 per share. The beauty is that when he pledges another say 10% and takes home another Rs.875 million, he is suddenly not concerned about what the company is doing. Even if the company now goes down, he has still made a cool Rs.875 million on an investment of Rs.500 million in three years.
I am not for a moment saying that all promoters are like that, but separating the scrupulous from the unscrupulous is very difficult in India, given the lack of regulations governing the promoter shareholding.
Unless SEBI wakes up to the reality and brings tough norms to regulate how the funds from pledged promoter shareholding can be used, many a unscrupulous and scrupulous promoters may be tempted to adopt the above mechanism and loot the Investors for their own personal benefit.
Monday, June 20, 2011
The Perils of a slowing Indian Economy - greatly exaggerated:
Every day the headlines and articles in leading Business papers and magazines scream at you pointing out the perils of a government in limbo - a slowing economy. Today's Economic Times headlines reads - Scared and Stifled, Babus delay decision making. Another headline says - "D Street (Dalal Street where India's oldest stock exchange BSE Is located) Mavens see Sensex sinking to 15k by December" marking a 16% fall. On the other hand you have data which says that Advance Tax collections are robust, salaries set to increase by 11-13%, PE investments on the upswing. These are contradicting news and can be very confusing to someone who wishes to analyse the investment potential of India.
True, the recent corruption scandals which are plaguing the government and the fight between the Civil Society and the government over a tough anti corruption Lokpal bill have created a sort of a Logjam. The government is busy staving off one scandal after the other and trying to protect its own turf and in the process all the decision making has taken a backseat. But this cannot continue forever. The lack of decision making at best can only be temporary. There are powerful reasons for this. Today no political party can afford to let slip on the economic growth: if they do so, they can expect to be routed at the polls. The fruits of growth have started permeating the life of the common Indian. Though the fruits are not distributed evenly, they are there for everyone to see. People who have not tasted the fruits aspire to taste them and those who have tasted them will not let go. In short, the momentum for growth has been built to such an extent that it is almost irreversible.
The businesses which finance the political system unofficially, also will not sit idle if they foresee the reversing of the economic liberalisation process.
These two factors have to be considered sooner than later by the government because if they lose the support of the people and their financers then the game will be truly up for it. This gives us real hope that in the next couple of months, the government will put its house in order by acceding to the genuine demands of the civil society by taking concrete steps to weed out corruption from the fabric of Indian society. The policy and decision making should resume and the indecisiveness plaguing the system should be a thing of the past.
True, the recent corruption scandals which are plaguing the government and the fight between the Civil Society and the government over a tough anti corruption Lokpal bill have created a sort of a Logjam. The government is busy staving off one scandal after the other and trying to protect its own turf and in the process all the decision making has taken a backseat. But this cannot continue forever. The lack of decision making at best can only be temporary. There are powerful reasons for this. Today no political party can afford to let slip on the economic growth: if they do so, they can expect to be routed at the polls. The fruits of growth have started permeating the life of the common Indian. Though the fruits are not distributed evenly, they are there for everyone to see. People who have not tasted the fruits aspire to taste them and those who have tasted them will not let go. In short, the momentum for growth has been built to such an extent that it is almost irreversible.
The businesses which finance the political system unofficially, also will not sit idle if they foresee the reversing of the economic liberalisation process.
These two factors have to be considered sooner than later by the government because if they lose the support of the people and their financers then the game will be truly up for it. This gives us real hope that in the next couple of months, the government will put its house in order by acceding to the genuine demands of the civil society by taking concrete steps to weed out corruption from the fabric of Indian society. The policy and decision making should resume and the indecisiveness plaguing the system should be a thing of the past.
Tuesday, June 14, 2011
Maruti Strike and increasing Workers Unrest...
The core issue in the strike that is on at Maruti Suzuki, India's largest car manufacturer, is the difference in wages given to the permanent workers vis-a-vis the temporary or casual workers. Employing temporary workers is an industry wide phenomenon and not restricted to Maruti Suzuki or the Auto Sector alone. In theory employing temporary workers helps you manage the peak and lean manufacturing cycles by optimising fixed costs on Wages.
However, the problem arises when the Corporates use this tool to maximise profits by employing these casual workers year around and do not give them pay parity or benefits which a permanent worker would have been entitled to.
This allows Worker Unions and trouble mongers to exploit the underlying resentment amongst the casual workers and create problems leading to strikes. If we see logically, then a temporary worker should get more wages than a permanent worker, since he is only employed for a part of the year and there is no guarantee of prolonged employment. This is the case in the Service sector and in daily life as well. However the manufacturing sector does not adhere to this logical thinking.
With rising inflation leading to increasing cost of living, combined with aspirations of the teeming workforce, the practices employed by the manufacturing sector regarding casual labour, unless changed, will lead to more such agitations. Unless the industry moves towards ending this exploitation in pursuit of unrealistic profits, the strike at Maruti may not be the last.
It is high time that the Industry chambers and leaders voluntarily adopted a code regarding the temporary workers or else, a time may come in the near future when the Government may have to step in with laws governing the employment of these workers.
If the policy makers are forced to step in, then at best, it will be a retrograde step. The industry then, should not cry foul and cast aspersions on the government that it is impeding the freedom of businesses. The solution lies in bringing parity in the working conditions, including wages, of the temporary and permanent workers. The sooner the industry does it the better it will be for all.
However, the problem arises when the Corporates use this tool to maximise profits by employing these casual workers year around and do not give them pay parity or benefits which a permanent worker would have been entitled to.
This allows Worker Unions and trouble mongers to exploit the underlying resentment amongst the casual workers and create problems leading to strikes. If we see logically, then a temporary worker should get more wages than a permanent worker, since he is only employed for a part of the year and there is no guarantee of prolonged employment. This is the case in the Service sector and in daily life as well. However the manufacturing sector does not adhere to this logical thinking.
With rising inflation leading to increasing cost of living, combined with aspirations of the teeming workforce, the practices employed by the manufacturing sector regarding casual labour, unless changed, will lead to more such agitations. Unless the industry moves towards ending this exploitation in pursuit of unrealistic profits, the strike at Maruti may not be the last.
It is high time that the Industry chambers and leaders voluntarily adopted a code regarding the temporary workers or else, a time may come in the near future when the Government may have to step in with laws governing the employment of these workers.
If the policy makers are forced to step in, then at best, it will be a retrograde step. The industry then, should not cry foul and cast aspersions on the government that it is impeding the freedom of businesses. The solution lies in bringing parity in the working conditions, including wages, of the temporary and permanent workers. The sooner the industry does it the better it will be for all.
Brand endorsements and stars...
I saw a picture of Aishwarya Rai who many claim is the most beautiful woman in the world. Now how would they know and what are the parameters for such a claim, only God knows. However this piece is not to debate if she is the most beautiful woman or not. The picture, taken at a race horse in Chantilly, France, showed an obese Aishwarya Rai trying to appear demure in front of the camera. Posing in a skirt with a jacket on top, the dress could not hide her fat frame.
The question is that do stars, who have millions of dollars worth of brand endorsements and advertising riding on their so called beauty, have the right to let loose their their restraints and defy the established norms of beauty?
It is based on these very norms that the endorsements were granted in the first place. The stars also have a lot to lose in terms of disappointed fans who could eventually become disillusioned and move onto the next big star. However this is a personal thing and if the stars want to risk it, it is perfectly fine. But what is not agreeable and is infact appalling is their utter disregard for the brands who trusted them. The Brands have a lot more at stake riding on these stars. Things like Brand Value which has been painstakingly built over a long time should not be allowed to be put at stake at the whims of the stars.
I am sure there are clauses in the Brand endorsement deals guiding the conduct of stars, what I am not sure is whether these agreements cover the weightier issues. If not, then it is high time the marketers put in such clauses. And if there are, then these should be strictly enforced. The stars should be shown the door and endorsements should be cancelled. This would send out the right message to these and other stars looking at lucrative endorsement deals, that brand images are not to be trifled with.
The question is that do stars, who have millions of dollars worth of brand endorsements and advertising riding on their so called beauty, have the right to let loose their their restraints and defy the established norms of beauty?
It is based on these very norms that the endorsements were granted in the first place. The stars also have a lot to lose in terms of disappointed fans who could eventually become disillusioned and move onto the next big star. However this is a personal thing and if the stars want to risk it, it is perfectly fine. But what is not agreeable and is infact appalling is their utter disregard for the brands who trusted them. The Brands have a lot more at stake riding on these stars. Things like Brand Value which has been painstakingly built over a long time should not be allowed to be put at stake at the whims of the stars.
I am sure there are clauses in the Brand endorsement deals guiding the conduct of stars, what I am not sure is whether these agreements cover the weightier issues. If not, then it is high time the marketers put in such clauses. And if there are, then these should be strictly enforced. The stars should be shown the door and endorsements should be cancelled. This would send out the right message to these and other stars looking at lucrative endorsement deals, that brand images are not to be trifled with.
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