Sunday, July 31, 2016

RT: Russia's very effective counter to western propaganda

In the course of surfing the Net some time ago, I stumbled on RT, formerly Russia Today, which presents news and perspectives from a point of view (not necessarily Russian) different from that of the mainstream media.

It's easy to brand it an arm of Russian propaganda but I have found the news coverage sober and balanced and, what's important, it does present a refreshingly different perspective. RT is a must read for anybody wanting to arrive at a rounded assessment of international affairs in the face of the fare dished out by mainstream western media.

FT carries a fascinating interview with its editor, Margarita Simonyan.

Here's a telling quote:
“I don’t see why you have the nerve to think that you know better than anyone how to run the world, and who’s marginal in the world and who isn’t. You’ve made so many mistakes, you’ve started so many wars in the last few years, destroyed so many lives, killed so many people, created so many problems.”

Update: Here's a link to an NYT story on how RT is covering the presidential elections in the US. Its' worth pointing out that RT's correspondents and contributors are not just Russian- it hires locals. In the US, it has roped in former talk show host Larry King.

Saturday, July 30, 2016

The 'revolving door' in finance continues to revolve

Mervyn King, former Governor of the Bank of England, has taken up a position as a senior advisor to Citigroup, FT reports. See also this story in the FT. The FT report notes the following:
Lord King has repeatedly criticised banks and bankers in the wake of the financial crisis, both during his tenure as governor, up to 2013, and since. He has described bankers as “incompetent and greedy”. In 2009, he told a parliamentary committee that the “vast amounts of money beyond the dreams of ordinary people” paid to bankers had engendered a reckless culture in the City of London. A year earlier, he bemoaned as “unattractive” the fact that so many top graduates were drawn to the City rather than other more worthwhile careers.

King follows in the footsteps of former US Treasury Secretary who hopped on to Citigroup after his stint as Treasury Secretary. FT mentions other such instances in recent times:
  • Former EU President Jose Manuel Borroso has joined Goldman Sachs as chairman, a move that the French president Francois Hollande called "morally unacceptable"
  • Former British PM Tony Blair got a juicy $2 mn a year contract from JP Morgan
  • Former Fed Chairman Ben Bernanke took up an advisory position at Pimco, the bond trading house
Those who have served in government or with regulatory agencies are in demand for obvious reasons. They can iron out problems with regulators or they can make phone calls that open doors on the strength of the relationships they have acquired while in government. The problem this poses is two-fold. One, it's not healthy for an ex-regulator or government servant to use his contacts to sort out regulatory issues of a private party. Another, more critical issue is: what degree of independence can one expect of a regulator or government servant while in service when it comes to dealing with important financial institutions? Who would not want to curry favour in the knowledge that a heft contract awaits on retirement on exit?

Thus, the 'revolving door' syndrome poses a serious threat to the framing of laws and regulations. How do we deal with it? An outright it may not be an answer because it could prevent talent from coming into government or regulatory agencies. Many argue that since jobs in government or in regulation are not well paid, there is every justification for those who have done these jobs to encash their expertise in the private sector by taking up advisory roles or serving as 'independent' directors ( the use of quotes is deliberate).

It's worth noting that RBI governors in general have conducted themselves much better. Y V Reddy faded gracefully into retirement and D Subbarao preferred a Fellowship at NYU to private sector offers. I recall Dr Subbarao being quoted as saying that he found that the terms offered to him seemed to have more to do with his association with the RBI than with the nature of the assignment offered to him. C Rangarajan served the government in various capacities and steered clear of the private sector.

I suppose one way to deal with the revolving door problem would be to give regulators a substantial payment (say 100 per cent of their salary) for, say, three years after they have stepped down in exchange for their committing not to associate with the private sector at the time they take up positions in regulatory agencies. Again, some may not be willing to join even on these terms but at least this goes some way towards addressing the problem.

Sunday, July 24, 2016

RETHINC now available in paperback

I am happy to share with you that my book RETHINC: What's broke at today's corporations and how to fix it  will be available in paperback from July 27. It's a slightly abridged and more accessible version of the hard cover- I've cut out some of the technical portions and simplified the language.

As readers of this blog would know, the book won  the Best Business Book of the Year award for 2015 at the Tata Literary Festival.

Here's are some of the links to the media coverage of the hard cover:

1. India Inc's attitude problem, Business Line.

2. Why you should question the cult of the charismatic CEO, Quartz

3. Offices without bosses? Achievable, says book by IIMA Prof, MoneyControl. Com

4. Can workplace democracy work across organisations? Business Today

5. Start from the bottom, Business World

6. The Statesman

Tuesday, July 19, 2016

Subbarao and RBI autonomy

D Subbarao's recent book on his tenure as RBI governor has occasioned another bout of government-bashing. Ministers trying to browbeat the RBI, we are told, is nothing new. What happened to Rajan also happened to Subbarao.

I haven't read the book but I have gone through the excerpts and reports that have appeared in the media. I can't resist the feeling that the idea of the RBI's autonomy being threatened by the government is hugely overblown.

When it comes to internal matters of the RBI, there is virtually no interference. On recruitment, pay and perks (broadly within the government framework), promotions, and numerous other matters, the RBI has a free hand.

On matters that impact on the economy- monetary policy, bank regulation, exchange rates, etc- yes, the government does seek to influence outcomes. But seeking to influence is not the same as browbeating or imposing. There are discussions and phone calls and the government conveys its views. There is nothing wrong with that as long as the it's left to the RBI governor to take the final call- and that has been pretty much the case with both Subbarao and Rajan.

What many people mean by autonomy is that the RBI should be left to its own devices in these matters and also that terms of RBI governors should be automatically renewed. That's too much to expect of any government, it won't happen and it isn't even desirable. The government is responsible for overall economic outcomes and thus will influence decisions at RBI and will also want to have as governor or deputy governor individuals with whom it has a degree of comfort. This does not, in my view, conflict with central bank independence.

More in my article in the Hindu, Limits to autonomy

Friday, July 08, 2016

Chilcot report: Blair is not the only guilty one

Former British PM Tony Blair has been justifiably skewered by all and sundry following the publication of the Chilcot report on the Iraq war.

To me, the most striking part is not Blair's role- that was plain enough even without the report. It is the role played by the rest of the British establishment- the spineless characters in the cabinet, the acquiescent bureaucrats, the willingness of MI6 to oblige a war-mongering PM and, not least, a jingoistic and baying media (supposedly the 'free press' of Great Britain). Every part of the establishment was party to the American effort to oust Saddam Hussein by force and in defiance of the United Nations.

Leaving aside a few luminous exceptions such as Robin Cook, the foreign secretary who made a terrific speech in the House of Commons and then resigned, the barbarity and manifest injustice of what the British government embarked upon did not evoke outrage or protest. After the horrors of the Third Reich became known and the Nuremberg trials highlighted the enormity of the atrocities perpetrated, the question was asked: how could a whole nation have been complicit in such thing?

Well, after the Chilcot report, it is worth asking: how was the behaviour of the British establishment different from that of the Germans in the time of Hitler? That was a totalitarian regime and dissent would have carried a huge price. But what about democratic Britain? Is the price of dissent so high that nobody is willing to pay it? Or is it simply that even the modest price that dissent involves- such as losing a ministerial job or lack of career progression in the bureaucracy- something that supposedly decent people are not willing to pay?  For all the claims that democracies make, a culture of dissent is noticeably absent in all walks of life- politics, the bureaucracy, the corporate world, the media and even academics. It's so much easier to simply toe the line.

I was thrilled, therefore, to read the story of a whistle-blower from GCHQ, the British equivalent of the National Security Agency in the US. The whistle-blower, a lady, received an email from somebody in NASA asking for information on countries on the UNSC that were holding out against a vote in favour of a war. She leaked the email and ended up getting charged by the government for violation of the Official Secrets Act. The charge was dropped when it became clear that pursuing the case would not be rewarding for the government. The leak of the email should have prompted scrutiny from parliamentarians and others of what the Blair government was up to. It didn't happen:

I believed that on receiving the email, UK parliamentary members might question the urgency and motives of the war hawks, and demand further deliberations and scrutiny. I thought it might delay or perhaps even halt the march towards a war that would devastate Iraqi lives and infrastructure already crushed by a decade of unrelenting sanctions. A war that would send UK and US service men and women into harm’s way, leaving hundreds of them dead, disfigured and traumatised. Unfortunately, that did not happen. It couldn’t, for now we know via Chilcot that Blair promised George W Bush he would be “with him, whatever”.
Amidst the yes-men and sycophants everywhere, there is the odd brave soul that is willing to speak up. There were a few other heroes and heroines-  amongst them, the head of MI5 who warned Blair of the dangers of Muslims everywhere being radicalised.

How do we nurture a society where more people are emboldened to express dissent? Unless we do so, all so-called democracies are seriously flawed. The mindset is essentially totalitarian with only one difference- you get a chance to vote every few years.

There's one other aspect of the Chilcot report that Robert Fisk, the well-known journalist, highlights. We do not hear the voices of the victims, the people of Iraq. The Chilcot enquiry did not seek their testimony:
The Arabs of Iraq – and now Syria – endure human disaster on an unprecedented scale because of the Blair-Bush lies, yet all Chilcot can produce with his seven years of literary endeavour and volumes to break the strength of any library shelf is a puny little domestic report on British politics and the self-righteousness of the midget who got it all wrong.

Tuesday, July 05, 2016

Sudha Murty, IIIT Dharwad and institutional autonomy

This is one item I have been following with disbelief- and, of course, I am assuming that ET has got the facts right.

The story, as you can see for yourself, is that IIIT Dharwad has plans for constructing buildings which were to be financed by MHRD (50%), the state government (35%) and Keonics, a state PSU (15%). After Sudha Murty was appointed Chairperson, she proposed that Keonics be replaced as a partner by Infosys Foundation. In return for the funds that Infosys Foundation would provide, the buildings at IIIT would be named after Infosys.

The MHRD referred the proposal to the law ministry. The law ministry objects on grounds of conflict of interest involving Ms Murty. I have a more fundamental objection: how can an institution funding 15% of a project want its name to be assigned to the project? At best, there could be a plaque in the buildings thanking Infosys Foundation for its contribution.

The story doesn't end there. Ms Murty apparently wants the mentoring institution, NIT Suratkal, to be replaced by IIIT Bangalore of which she happens to be a board member- another conflict of interest.

This little episode reinforces a point that I have long been making and that readers will be familiar with: it is most unwise to leave the governance of public educational institutions entirely to boards of governors in the name of autonomy. Those sitting on these boards have little stakes in these institutions and cannot be expected to take care of the long-term interests of the institutions. The government needs to keep a watchful eye through its own representatives and by requiring the institutions to obtain government approval in important matters.

This is the reason I favour the IIM Bill. TOI reports the Bill is being held up following objections raised by the PMO to certain provisions. The PMO does not want the HRD minister to head the IIM council and it also has reservations about the President being the Visitor to the IIMs. The PMO does not think that the IIT model is appropriate for the IIMs.

I'm afraid the PMO is mistaken on these counts. Matters cannot be left to the IIM boards- there has to be an independent authority to oversee the boards of the IIMs. This is because there would otherwise be no checks and balances otherwise on the functioning of the boards. Boards are ineffective even when they are subject to the discipline of the financial market. Where market discipline is absent, boards can become seriously dysfunctional and harmful.

This is not just my view. Matters haven't been put to vote at the leading IIMs but my sense is that a majority of faculty feel that way. We feel that faculty autonomy is better safeguarded by having the ministry watch over the boards than by leaving matters entirely to boards. Our greatest apprehension is that faculty autonomy will be undermined if matters are left to IIM boards as, in practice, this would result in unchecked powers for the directors of the IIMs. We see the government as the saviour and protector of faculty autonomy, not as a threat. As long as we are governed by the rules of service of the government of India, we believe we can express ourselves freely as academics.

It would be worthwhile for MHRD and the PMO to engage faculty at IIIT Dharwad and at the IIMs in these conversations. The PMO may be well-intentioned but it seems unware of the facts on the ground. It would benefit by eliciting faculty views on these matters.