Principal-agent problem in Corporate Governance

The principal - agent problem in Corporate Governance manifests itself in different ways. This problem arises because the owners of the corporaion ( the shareholders) , delegate the management and to a large extent, control, to the managers of the business, who are supposed to act as agents of the shareholders ( principals) in running the business and safegaurding its assets. The role of the Board of Directors is to control and supervise the agents to ensure that this principal - agent arrangement remains effective.

The problem arises when the agents start self-dealing and mis-manage the affairs of the business, either out of greed or out of sheer incompetence.

(On a lighter vein) - Of course, most of the businesses in India have eliminated this problem by fusing ownership and control very tightly.

A Pune-based company ( which used to be a darling of the investors but has been into problems in the recent past, largely due to its overseas acquisitions and consequent debt burden) has been advertising in various media recently. The advertisements / communications is focussd on a forthcmiong brand campagain and is in form of a advertorial / special feature.  What is surprising is , that the pictures of Global Head of Brand Management for this company features prominently in the ads( which are otherwise text-only).  As a result, these ads appear to be like the ones PSUs and Government bodies are known to come out with. In the past, the company has done some quality brand campaigns, using environment as the theme. However, the couple of examples of the current ads I have seen so far seem to facilitate profiling of the said manager, and do not at all suit the stature the company has projected in the past. An example of the principal-agent problem, even though the scale / scope is not significant beyond a point?

The point is - problems in corporate governance have myraid sources and can take different forms and shapes. Also, it is wrong to assume that only the promoters are responsible for such mis-governance. Professionals and career executives are no less fallible, as we have seen in Enron and other corporate scandals.  

Sunny Days and spices in Istanbul

One of my pet peeves with the English language media in India is the westernized approach many of their columnists / analysts take. In the world-view that English newspapers present to their readers, the following gems are oft repeated and make me mad  

1.       Sunny Days

India is probably a cold, temperate country, as per this world view - What else can explain the refrain and references to sunny days. In this world (existing in the heads of English newspaper columnists) sunny days are good and we all should look forward to them. Try telling that to someone staying Delhi, having to go out at 2.oo p.m during the month of June. Or a labourer working on a construction site in Chennai during May! Have they never heard any bollywood songs, extolling the virtues of ‘suhana mausam’, ‘badal ghir aaye’  and so many songs on ‘sawan’. In India, its the monsoon season or rains and clouds which are harbingers of prosperity happiness and joy (being an agrarian economy and a warm, tropical climate).

2.       Spices in Istanbul

When one travels to say, Istanbul or Egypt, one can look forward to buying spices! So on your visit to the Grand Baazar or Kha-al-Khalili markets or any of such souks or old markets in Asian / Middle-Eastern countries, we should spend foreign exchange in buying ‘haldi’ or ‘saunf’ !

3.       Mumbai street-food is the best

Every week, one of the three newspapers I read have something or other stating or indication that Mumbai has the best street food. Hailing from U.P and having stayed in Calcutta for a considerable time, this irks me no end. Ok, it might be a personal prejudice. But have any of these people ever tasted the chat in Delhi, puchkas in Kolkata, kachori in Varanasai or Bhalla in Agra? Just ‘coz Mumbai has crappy food overall doesn’t mean that facts can be manufactured and an illusion built around its street food. 

                (I read the editions in Mumbai, but can safely assume that the same would apply  elsewhere too)

The hike of Pi

I absolutely , completely, refuse to believe various speculations that the recent petrol price hike of Rs. 3.14 per litre had anything to do with Pi - the mathematical constant with an approximate value of 3.14.

The reason is simple. There is no way the (un)holy trinity that rules the country ( the mother, the son and the  puppet) can comprehend a mathematical concept. The Prince, despite purported to be schooled at Stephens and Harvard, is well known not to have any academic inclinations. The Mother has similar, questionable academic track record. This leaves the well-educated, intellectual, puppet. Well, which puppet in this world can disobey its masters, without unpleasent consequences ( Pinnochio !).

Another reason, perhaps more important, is that Pi, being a mathematical concept, requires rational thought. And the GOP of India can never recognize a rational thought, even if it came and danced in front of them.

UPA Government to get Noble Prize

The UPA II Government is expected to be awarded the Noble Prize ( all categories rolled into one ) for its invention of right wing terror. This useful device is targeted at diverting an entire nation's ( comprising a billion people) focus from real issues and real terror to wild goose chases, perpetual blame games and is estimated to be extremely effective at the government not having to work on solving real issues at hand.

On a related note, Governments of various European countries, including Greece, Italy,Spain etc. are planning to enter into discussions with the Indian Government to examine if such devices can be customised and used in thier respective countries. to wish away the problems their economies are facing.

The PIL Game

Actor Imran Khan has been threatening to file a PIL against the Maharashtra Government's move to impose age-limit on drinking. Imran Khan first declared his intention to fight for 'civic liberties' and this important issue facing the nation and its youth today, during June 2011. After 3 months, Imran has re-appeared on front page of Times of India today, re-affirming his intentions to move court.

Of course the timing has nothing to do with the release of his latest movie last week. Of course this is not a PR stunt, with the most evolved news daily in the country choosing to feature it prominently on its front page. Of  course this is one issue which surpasses all others in importance and merits the time and attention of our legal system ( after all, who can argue against civic liberties?).

I sincerely wish, pray and hope that India's real youth know and realise their real priorities in life, and learn to distinguish between the real and the frivolous.

The attitude of public servants

Gaurav Sabnis has blogged about an example of the sensibility of public servants in US in his latest post http://feedproxy.google.com/~r/blogspot/NMnB/~3/dPVlm56tU9Y/public-servants-america-vs-india.html.

In Mumbai, Cops are routinely seen travelling in Ladie's 1st Class compartments of local trains, obviously to escape the bone crushing crowds in Gent's 1st Class ( and one can't even imagine them of travelling 2nd Class !), though to give them credit, they never enter the compartment and travel at the entrance / footboards. This is taken as par for course.

Of late, I have been seeing cops travelling in the compartment reserved for handicapped. This "compartment" is only one seat wide and meant for handicapped or those suffering from life-threatening diseases such as cancer. Public servants inconveniencing handicapped / sick people by encroaching even upon this meagre space makes a grim contrast with the attitude Gaurav has observed in NY.