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Gurinder Ahluwalia

Director, AnahadMC


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New world order is gravitating towards democratic system of governance but overwhelming number of corporations follow top down approach ?

Recently Unilever went through global restructuring of its operations that has led to reduced delegation of decision making so as to centralize the decision making. Many a times there are stories of firing of senior execs during brief interaction with maverick bosses in high speed elevators. Rise of China also dilutes the myth of delegation & bottom up approach to decision making. How can we reconcile the dichotomy between prevent culture outside the organisation & within? Can the people effectively live in two diametrically opposite cultures everyday without compromising their sanity?


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    Tom Key

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    May 16 2012: Peter Drucker, often credited with prescriptions for modern corporate business, would often remark that dramatic wealth inequality was a watermark of a business on the way out. He warned that a Board of Directors filled with men about the retire would be practically useless. And he thought that shareholders should have meaningful information about the directors "running" for office within the corporate governance. He used the word "sham elections" to describe rich CEO's holding perpetually re-elected sinecures by means of interlocked Boards.

    The point is, just as the difference between a Monarchy/dictatorship and a republic is the "election" process, Drucker also taught that elections should play a meaningful role in the corporations, for the same reasons. Elections do not guarantee great leadership, or good business judgment within the corporation, but if it may be best practice, for both public and private organizations.

    The free market model is not based on ideology -- the Marxists and the Austrian/Chicago school are both based on Adam Smith logarithms -- nor is the model limited to incentivizing the productivity of private enterprises. The freedom of the market should also be valued and protected in the public service sectors as well. Adam Smith warned us in his 1776 Wealth of Nations that once a Republic is in place, the great danger of oppression is not from Government but from the large private monopolist enterprises. Capitalists seek to destroy competition and acquire monopoly. Hence the need for meaningful elections in both public and private enterprises, as a means of protecting the free market.

    At the heart of the election process is the free market concept of "choice". And the key to meaningful "choice" is transparency and information. Ultimately the informed voter participating in a market protected from monopolist tendencies is what can insure good business judgments for both public and private enterprises.
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      May 17 2012: Hi Tom

      Could you define Adam Smith logarithms?

      Could you explain how the Marxists school is based on Adam Smiths work?

      It seems to me that capitalists seeking a monopoly is not much of a problem as inevitably IBM gives way to Microsoft gives way to Apple or, Ward & Harrington gives way to Sears gives way to Walmart,so a monopoly may be strived for but it is not going to happen with the exception of crony capitalism which appears to be a more real danger as with Goldman Sachs, GM, ADM.
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        May 17 2012: Pat Thanks for your views. Let me share why i seek clarification of this topic. There are large number of profit seeking entrepreneurs who have no loyalty to their own company except how much money they can make out of that. Such promoters have no regard for the team that risk their career by seeking employment in such companies. India, where i live, is characterized by large number of large & mid size companies controlled by the promoter family. There are many other places worldwide that have family owned enterprises. Most of the times in such companies the decision making is restricted to family alone and the executives have no say in decisions that are equally critical to their profession & career. A top down company would survive longtime due to protection offered by governments. My experience of working with such companies is quite discouraging.
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          May 17 2012: Gurinder

          The reality is that everyone looks out for their self interests to say otherwise is just not true maybe it is a nice sounding platitude but just not reality.

          Who says that the large companies following their self interest do not benefit the whole? Doesn't Walmart sell their stuff for less money therefore helping their customer more than their competition (the smaller stores)?

          I will agree with you about the collusion between government and corporations that is a problem that requires smart voters.

          You say "My experience of working with such companies is quite discouraging." I don't know what that means?
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        May 18 2012: Pat, Thanks for your comments, let me try to answer. Everyone may not look for self interest all the time. Well most of us ct selfishly majority of the times. A good team player is supposed to pass the ball and be a playmaker. But i agree that most of the times we all watch our personal self interest.

        I am not objecting to pursuance of self interest of large companies as it is normal wealth creation. Walmart is a great retail company that we all are proud of but if Walmart promoters in the face of competition abandon their core business and get into say a b2b turf like machines tool business or paper & pulp. What happens to the team that is passionate about working with a b2c domain. Unrelated diversification by promoter family brings serious dangers upon professionals who have picked up a particular kind of skills & attitude. I am against unrelated diversification for objective of creating wealth for the promoter family alone.

        Smart voters & good democracies are utopia. India has been a democracy for 65 years but most citizens are afraid of police and slow moving judicial system. Companies in India do not allow for FDI as they lack competence to face global companies. I visited China for first time in 2006, i am impressed by the progress they have made. Democracy could wait till all citizens can get employment in their own country.

        Hope you would have got some clarity about reference to 'my experience'. Well in India we have wealthy promoters of decaying companies. How? It is the promoters who don't mind bleeding their own company to fill their personal coffers. Once they have milked the company they move to another one leaving professionals stranded in dying industries.
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      May 18 2012: Thanks a lot Tom for your illuminating comments. Rise of China is a boon for a billion plus humanity who would be saved from the horrendous poverty, whereas a democratic India is nowhere near providing food on the table of half a billion people. What good is democracy if we have unrestrained corporate greed in India where an individual can get arrested for not paying a $20 credit card debt and a big companies own billions in unpaid taxes to the government besides adding to the NPAs of nationalized banks.Free market economy has taken away little security that employees had in terms of labor laws thus making companies throw out people to cut costs despite their family's salary bill keeps on increasing every year. I am not sure how India would be able to handle the challenges of the future.

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