Tuesday, May 30, 2006

Our Corporate Masters

Building corporate character
From The Statesman

Last week, Kenneth Lay, former chairman of the defunct energy company Enron, and Jeffrey Skilling, former president of the company, failed to convince the jury that they had done nothing wrong personally, that Enron was a good company stampeded to death by market panic, speculators, and footloose media reports. Both were convicted on conspiracy and fraud charges.

Good for America, and a lesson for others.
A company that strode like a giant with global footprints, including one at Dhabol, Maharashtra, collapsed in 2001, taking down hundreds of thousands of shareholders, employees and pension holders’ funds. The collapse of Enron was one of the many corporate scandals that hit the USA at the beginning of the new millennium, shaking the faith of the American people in corporate America. Many top corporate executives were hauled to prison, handcuffed like common criminals, as will be the case with Enron’s Lay and Skilling, when the sentencing is done.

Corporate USA functions on command and control, with little internal checks and balances. The political system, however, is based on a built-in checks and balances system along with a free Press that keeps politicians under restraint by exposing them to public ridicule, threatening to impeach them or put them in jail.
Several American presidents, state governors and legislators have been disgraced because of their abuse of power. The notorious lobbyist Jack Abramoff has named names and testified against members of Congress whom he bribed to buy favours for his business clients. It is worthwhile to watch the unfolding American drama of political corruption and how the system cleanses itself periodically.
The functioning of the political system is not left to the innate goodness of the people seeking power. Nor is the development of good political behaviour left to any kind of special education or training in ethics course work in schools or colleges or the culture of the sports arena, for that matter.
The temptation of power trumps everything else ~ transparency and accountability are indispensable to good governance. That, unfortunately, is not the case with corporate USA, where most Americans are vested through their pensions and other retirement accounts. Today, we live in a world where corporate power overshadows most of our activities. The class struggle of workers v capitalists has been replaced by public interest civic groups v global corporations.
Corporate leaders rise to power on the promise of maximising profit, market value and economic health of their companies. Shareholders’ interest is limited to annual returns and dividends. The boards of directors are amoral; their interest is limited to increasing shareholders’ value. They hunker for executives who maximise their investments. So long as an executive performs well and exceeds the expectations of Wall Street, he can get away with excesses.
Last year, former chief executive Bernard Ebbers of WorldCom (now MCI, Inc), whose $11 billion fraud drove the telecommunications company into bankruptcy, was sentenced to serve 25 years in prison. The former financial chief officer of the company, Scott Sullivan, who pleaded guilty and testified against his former boss, told the jury he had warned Mr Ebbers that accounting adjustments, creative accounting or cooking books, whatever you call it, could not be justified.
Mr Ebbers told him the company had to “hit the numbers,” and meet the financial and revenue targets. Underlings were, of course, blamed by Mr Ebbers for the fraud, said to be the largest in the US history. At its peak in 1999, WorldCom had a market capitalisation of $180 billion, and Mr Ebbers was a darling of Wall Street. But it was a reputation built on sand.
When WorldCom’s real earnings could not meet the forecast, Mr Ebbers asked the account department to “adjust the numbers”. Corporate accounting departments are notorious for slouching towards the powerful.
Wall Street analysts and financial journalists who, out of fear or favour, work as paid employees of big corporations rather than as watchdogs of public interests, went along with the web of lies woven by the WorldCom team until the whole edifice began to collapse in 2000, and the share price sank to $15 from a high of $65.
But Wall Street seldom forgives anyone’s trespasses. One cannot get away with lies for too long, but sometimes the price a company and eventually the public pay is too high, and the damage to reputation is irreparable.
Why do corporate executives misbehave? Deborah Gruenfeld, professor of organisational behaviour at Stanford Business School, discussing the psychology of power and leadership in Stanford Business Magazine said: “Behaving badly may be natural at the top.” But why? According to her research, power creates “disinhibition”. In other words, power gives you a feeling of immunity from the consequences of your actions, especially when your salary and bonuses are in a stratospheric region. Consider the pay package of Exxon Mobil Corporation’s CEO Rex Tillerson for 2006, which at $13 million is the highest in US history. What does this man think about the rest of us struggling to fill our gas tanks? Can we make corporate bosses honest, even when we pay them so much?
Can we instill ethics into their souls? May be, the ignominious march of Enron’s Mr Kenneth Lay and Mr Jeffrey Skilling to prison will instill some sense of fear, if not ethics, into our highly paid “disinhibited” corporate masters.

Tuesday, May 23, 2006

The future is digial

Going digital at full speed

N D Batra
From The Statesman

The enthusiasm about the Internet among the young and the old all over the world has been increasing steadily. Memories of the deflated dotcom balloon have faded. The digital age is rising on a solid foundation as more and more users begin to realise the Internet’s potential in diverse fields.
The main reason for the growing popularity of the Internet is that it makes the users’ lives easier. Though this is basically an adult view ~ teenagers value the Internet for different reasons ~ the fact remains that its popularity among all sections of society especially in the USA is widespread.
The phenomenal rise of Google shows that dotcom companies have not slowed down. The users regard the Internet not only as a limitless source of free information available at a mouse click but also a shopping mall, banking street and place to socialise. Of course, some people still don’t feel confident about trusting the computer screen ~ even if an online grocer gives free home deliveries; they would rather go to the store, browse and enjoy the sensuous experience of personal shopping.
Habits die hard, especially for the old. Some time ago, the Markle Foundation issued a report that confirmed the widely held view that the Internet is “a source of worry” regarding privacy, pornography, accuracy of information (“You have to question the truthfulness of most things you read on the Internet,” said the respondents) and accountability. As these concerns diminish, the dotcoms would become a pre-eminent engine driving the economy, as one can see happening in India to some extent. The question of accountability is a typical one that the American public normally asks, whether it is a tire manufacturer, pharmaceutical company or a television network.
But since the Internet is not owned by anyone and is “impossible to govern”, the question of accountability becomes intriguing and difficult to handle. As the report said: “The public is concerned about accountability online, in part because they believe they have fewer rights and protections when they use the Internet than in comparable offline activities.” The American public by a wide margin is worried about the government and private companies collecting information about them when they are online. Data-sniffers do make us vulnerable on the Internet. If in a shopping mall someone watches or stalks you, you become alert and take action; or may be choose to do nothing. On the Internet you don’t know who is watching you and why, which creates diffused anxiety and consequently reduces trust in the system.
The public wants the ungovernable to be governed, may be through some kind of commission, Federal Trade Commission, for example; or Interpol. Amusingly, to a hypothetically question as to who to include in a watch dog body for the Internet, the respondents mentioned two interesting individuals: Oprah Winfrey, a most trusted talk-show hostess, and Bill Gates about whom an American judge, Thomas Penfield Jackson, who tried the monopoly case against Microsoft, said that he had a kind of a Napoleonic complex and wanted to dominate the world through his company, and recommended that the company be broken up. The judge had not foreseen the rise of Google; nonetheless, Bill Gates is even today a most admired person in the USA. The adult users’ view of the Internet contrasts sharply, in many respects, with what American teenagers think about cyberspace.
Teenagers love the Internet’s freedom and anonymity. For them it is an equaliser, a source of empowerment, “an authority free zone” where “they feel less likely to be judged,” a nowhere land that shuts out “curfews, homework, teachers, and parents”. Unlike adults who want the Internet to be regulated somehow, teenagers prefer the Internet to be left alone, to keep it “as anarchistic as possible”, lest its freedom be compromised. They are aware of the dangers of meeting strangers and predators online but feel confident of dealing with the situation on their own, a view that also finds expression in other reports about the Internet and teenagers. Teenagers are also not as much concerned about surveillance as adult users are, which seems a little puzzling. I believe teenagers’ indifferent attitude regarding data mining and profiling is due to the fact that they have very little to lose in material terms, for example, credit card identity theft, financial blackmail, bad credit, et al.
Fear grows, as we grow older. Like my own students whom I occasionally use as focus groups to see which way the social winds are blowing, the teenagers in the Markle survey felt that it is the responsibility of “the individuals to educate themselves, or for parents to take responsibility for looking after the safety of their children.” The survey was limited to teenagers coming from stable American families because it did not answer the question about vulnerable teen users of the Internet who come from single-parent families, or those where parental supervision is not available.
When the family bonds are loose and guidance minimal, how would teenagers deal with the freedom of the Internet, especially with portals like MySpace where kids can do whatever they want, posting personal and private thoughts, pictures, whatever. This makes it difficult to resolve the dilemma how to regulate the Internet, when the two main user groups, adults and teenagers, disagree sharply about the role of the government and private companies in cyberspace. Nonetheless, the world is going digital at full speed.

Tuesday, May 16, 2006

De-fanging Pakistan for world peace

Why doesn’t India take terrorism seriously?


The heart-wrenching picture of Manisha and Anisha, daughters of the slain Indian engineer K Suryanarayana, wailing beside their father’s body at the time of his cremation, “Shattered Dreams,” as The Statesman captioned it, should open our eyes to the fact that war against terrorism will never ~ ever ~ be over.
Some analysts and commentators have been dumping Islamic terrorism with Maoist insurgency and incidents of communal violence, as if they were a continuation of the same problem. It is just like a quack telling you that cancer and malaria are the same disease because both kill their victims, much like traffic accidents kill people, which is no way of facing the horrific realities of international terrorism.
The modus operandi of terrorist attacks in Afghanistan or Iraq is no different from that in Kashmir where in April 32 innocent people, Hindus only, were dragged from their homes and killed in Doda and Udhampur; or Varanasi where in a temple attack 30 people were killed in early March. You see the monstrous face of Islamic jihadism: death and destruction multiplied thousand times by an endless cycle of television images, disembodied end-of-the world sounds and images of scarred and mutilated humans and buildings, fear magnified and mirrored on hundreds of ghostly faces everyday.
Fighting terrorism is not a gentleman’s game. It consumes a politician, as President George Bush knows. Superb intelligence gathering, preemptive and preventive measures and anticipatory disaster plans could go a long way in minimising the damages, if India would take terrorism as seriously as the United States of America does, and politicians are prepared to pay the price in terms of popularity. President Bush’s popularity is down in the drains but he keeps fighting terrorism. Since September 11, 2001, there has been no terrorist attack in the USA. When would one say that about India?
Eradicating terrorism is not a simple matter of bringing one evil man to his heels; or killing a militant here and a militant there. Although its origin lies in religious fanaticism and a blind hatred of non-believes, at an organisational level terrorism must be considered as an enterprise that manufactures dread, customised for each political and cultural market. The response of each country, therefore, has to be different. Though the USA cannot directly help India fight terrorism, working together on a long-term basis, especially in Afghanistan, would strengthen both countries’ efforts in fighting terror.
Osama bin Laden alive and kicking in Pakistan is not alone. Nor could he plan and execute bloody carnages in so many places without the brainpower and resources of a multitude of strategists and financiers living in sanctuaries in Afghanistan, Pakistan and the Arab world. Chris Patten, chancellor of Oxford University and former EU commissioner for external relations, last week wrote a piece in The Wall Street Journal holding Pakistan singularly responsible for the prevailing instability in Afghanistan, and asserting that the nation’s primary export to Afghanistan today is terrorism.
“Every few days,” wrote Lord Patten, “the resurgent Taliban carry out another deadly attack on school children, aid workers, or local and international security forces... On the most basic level, attacks in Afghanistan, including suicide bombings, are often planned and prepared at Taliban training camps across the border.”
And Pakistan has done nothing to stop them in spite of President Pervez Musharraf’s protestations to the contrary. Lord Patten, former governor of Hong Kong, knows what he is talking about. So should US Secretary of State Condoleeza Rice, though for diplomatic reasons she may not be able to speak up as frankly as Lord Patten has done regarding runaway radicalism in Pakistan: “Demilitarising and de-radicalising Pakistan is truly the key to bringing about stability in Afghanistan and the wider region.”
The killing of Suryanarayana should be seen in the light that the Government of India or any other government wouldn’t be able to assure anyone’s safety unless terrorism is rooted out at its source, which according to Lord Patten flourishes in India’s neighbourhood. But the terrorists also flourish in open and secular societies in Western Europe, Canada, the United States of America; only more so in India. That’s what complicates the matter.
How do we recognise the enemy who may be also amidst us without violating the values of the open society that we are trying to protect? It is puzzling that the global financial system is very much intact and the confidence of the investor remains unabated, but wails of mourners continue.
Attacks against ethnic minorities adversely affect civil liberties, which are already under threat. In the USA, law enforcement authorities have been given expanded powers of surveillance including wire-tapping and e-mail scrutiny. Last week’s Washington Post-ABC News poll indicated that 63 per cent of Americans approve President Bush’s domestic surveillance practices to fight terrorism, though his overall approval rating has sunk very low.
Open societies face a serious dilemma. As law enforcement authorities try to locate and destroy international terrorist cells functioning openly or clandestinely in their own backyards, they need to do so with minimum loss of civil liberties and without endangering the security of ethnic and religious minorities.
Whatever happens in Kashmir should have no repercussion in the streets of Ahmedabad.The struggle against international jihadist terrorism is going to be a relentless, long drawn out global campaign from which India cannot escape. India has no choice but to keep fighting.

Pakistan's weapon: Terrorism

Why doesn’t India take terrorism seriously?

Tuesday, May 9, 2006

Branding Scotch but what about Taj Mahal?

Darjeeling, Basmati, Scotch

CYBER AGE From The Statesman
ND Batra

Recently, when I visited my colleague, he offered me a cup of Darjeeling brew. And whenever I used to visit my cousin in Mumbai, he would offer me Scotch.

I anticipated the pleasure and knew what I was getting. The recent Delhi High Court ruling that Indian brewer Golden Bottling cannot appropriate “scotch” or similar sounding words to brand its own whiskey is a most remarkable decision in the sense that it recognises a geographical region as the site of a global brand, which is in accordance with the Geographical Indications (GIs) clause of the WTO-TRIPs agreement. GIs confers intellectual property rights on a product from a region “where a given quality, reputation or other characteristics of the good are essentially attributable to its geographical origin”. Basmati and Darjeeling are no different from Scotch, are they?

The only way to get a sensible grip on a widely misunderstood but fashionable concept, knowledge-based society, is to define it in terms of intellectual property rights. Much of the rest is propaganda to shock and awe the innocent.

Many of us still can’t get over the shock that that a Texas-based company, RiceTec, was given the patent for a supposedly new strain of Basmati rice. Something which has defined the Indian sub-continent for centuries was gobbled up by a knowledge-based society, where assembling, re-assembling, storing, patenting and branding of information is becoming a major source of wealth, power and hegemony.

Contrary to what you learn from the high-minded, a knowledge-based society is not one whose members are inquisitive, knowledgeable, skilled or willing to learn all their lives. Rather, it’s a society where information and knowledge are created for money. It is its ability to build legal infrastructure, enforce laws and claim ownership of information through copyrights, brands, trademarks and patents. Danjaq and United Artists warn that only they can make James Bond 007 television and film series. RiceTec too asserted the claim that only it should have the right to call its rice variety Basmati including its variants, Texmati, Kasmati, etc., and forbid others from using similar sounding brand names.

It goes much against the popular belief, but a patent’s legal force does not lie in giving one the permission to exploit an invention; rather it permits its owner to exclude others from making, using or selling the invention. If it had gone totally unchallenged, the RiceTec patent might have been be used to exclude Basmati traders and exporters of the sub-continent not only from the US market but also from the rest of the world markets. It may sound far-fetched and paranoid that this could ever happen, but the law, they say, is like an Indian donkey: it can hit anyone with any leg at any time. But mostly the donkey favours the rich and the powerful. Competition for a share in the world marketplace is so ruthless that few would disagree with Intel’s CEO Andy Grove when he says, only the paranoid survive.

It’s not so simple to answer the question, what is patentable? US law requires that the invention must be practical, deal with processes, machines, manufactures, compositions of matters; or the new uses of the above. It must be useful, novel and non-obvious (unique). Plant patents, under which rice plant falls, according to US Patent and Trademark Office, “are granted to any person who has invented or discovered and asexually reproduced any distinct and new variety of plant, including cultivated spores, mutants, hybrids, and newly found seedlings, other than tuber-propagated plant or a plant found in an uncultivated state.” But Basmati is not only rice. Like Scotch and Champaign it is the flavour of a region, a cultural icon.

Since the uses and unique attributes of Basmati have been known for centuries, so one might ask: What did RiceTec add to it for which the company was granted a patent on some varieties? Probably nothing worth patent-able, but it does give us a glimpse into the shape of the knowledge society to come: creation of brand names, trademarks, value added-information; and not the least the ability to exploit information for commercial purposes through international treaties, backed by diplomacy, legal chicanery, FDI or even brute force.

This is, however, not to belittle the importance of intellectual property rights, without which writers, creators and inventors will perish, and society will stagnate. But we must demystify the slogans of the emerging information society and understand its modus operandi, its terms of empowerment.

Consider the trademark law, which was originally enacted to prevent unfair competition, and is used to protect words, symbols or images that identify a business or its products. Trademarks have existed since the Middle Ages and they have been always protected under the common law of usage. Coke, for instance, is a distinctive trademark of the Coca-Cola Company and it would be unfair competition if some other company were to use it. So are Kodak, Xerox, Exxon, the Golden Arches, etc. But when Donald Trump, a New York real-estate tycoon, plunders a cultural symbol like the Taj Mahal and uses it as trademark for his gambling casino in Atlantic City in New Jersey, there is something wrong the way the world is turning into a global marketplace. If a knowledge-based society uses religious icons and other sacred names to sell sneakers and other consumer goods, it is time to challenge its presumptuousness.

Commenting upon India and Pakistan forming a working group to bring Basmati into the GIs fold, Ashfak Bokhari wrote in the Dawn: “More often than not, bio piracy occurs in the West and that too primarily because of the inherent western bias towards the Third World. The West still suffers from the ‘Columbian blunder’ and assumes it has the right to plunder the resources of the non-West countries by treating their people’s knowledge systems as non-existent, hence empty of prior creativity and prior rights, and hence available for ‘ownership’ through the claim of ‘invention’.”

The (mis) appropriation of Basmati, a defining culinary-religious symbol of the Indian subcontinent, into an intellectual property right, as RiceTec has done, is a cultural assault and must be fought tooth and nail, along with other misappropriations of cultural symbols and sacred images of ancient civilisations, wherever they happen.

Tuesday, May 2, 2006

Media smart CEOs

Advice for golfing CEOs

Cyber Age
ND Batra
The Statesman

While we were waiting to tee off, my golf buddy who happens to be the CEO of a global company, asked me how a company should deal with journalists for whom bad news makes a good story. The news media, I agreed, have begun to play a very significant role in the conduct of both national and international business. 24/7 television news is converging with the Internet, making events live and spontaneous beyond the control of gatekeepers. The rise of bloggers, Online whistleblowers and public interest groups, enables the presentation of alternative views of what companies are doing.

Gone are the days when a business could be conducted beyond the public view. The reason for this heightened interest in what companies do is simple. The impact on people’s lives even if they are not directly invested in a company is tremendous. The very presence of Home Depot or Wal-Mart in a town raises fear and expectations. This gives rise to the need for intense scrutiny by the news media. When India’s Ambani brothers of the Reliance conglomerate were fighting, Wall Street was watching keenly.

Of course, the news media is itself a global business and is subject to rules and regulations like any other business. But in the United States and in many other democratic countries, especially in Europe, Japan, India and Australia, the news media has a privileged position.

In the United States, it is extremely difficult to win libel damages against the news media because of the legal provision that the plaintiff must prove what is called “actual malice,” or “wreckless disregard for truth.” Proving media negligence only is not enough to win libel damages. The near immunity from libel gives the news media freedom and encourages investigative reporting and keeps society healthy.

Because of the inescapable fact that our economic well being, pensions, retirement savings, environment and quality of life have become dependent on the marketplace, no business can escape media attention. Bigger companies invite the healthy suspicion of the media about their activities. Add to it millions of blogs that feed upon each other.

The conspiracy of silence is possible only in a one-party authoritarian state like China, which probably is one of the reasons why global corporations want to do business there. There are very few anti-business reports from China, which nevertheless in the long run might prove counterproductive. So what can be done?

A company doing business globally has to become media savvy and must understand how news organisations work and how they produce stories. Corporate communicators and diplomats have to understand the media’s sources of information and their reporting methods, and have to learn how to influence them by providing them correct information.

Companies have been using advertising as a major method of influencing the public ~ for example, oil companies, BP and Exxon-Mobil, make advertisements to divert attention from the alleged price gouging at the pump. Advertising is still a powerful mode of direct communication with the public at large. But advertisements cannot beat headline news, breaking stories, or special reports with which the news media try to draw public attention that is distracted by infoglut.

It is a big challenge to be heard in the Tower of Babel and more so, when the reputation of the corporate world, because of a series of accounting scandals and the personal misconduct of some companies’ CEOs, has created an air of diffused distrust in the public. Let us keep in mind that no reporter could ever turn a bad story into a good one, especially in crises, when news organisations and celebrity journalists try to outdo each other.

News is a competitive business and no one can afford to keep silent over a story that has an impact on the public. In good times, a company that has excellent working relations with the news media can strengthen its position by presenting positive stories and thus enhance its reservoir of public good will. Consequently, when a crisis hits the company, it will be able to draw upon the public sympathy.

Building social capital is as important as building market capital.
The traditional method of issuing press and video releases is still relevant, especially in local news media outlets, where the paucity of resources might prompt a local television station or a newspaper to repackage a company’s story as a news item. But national news media organisations are inundated with e-mail news tips, and video and press releases and so, they hardly pay attention to junk mail. It is therefore important to target the right people in the news media.

Steps for effectively dealing with the news media require research. But the following points can be helpful:

First determine whether you have a definite story and whether it needs to be told to the news media and why.
What is the audience for the story and which news media would be the best to reach? Which reporters normally cover such stories and which one of them would be most sympathetic to your story?
Is the reporter accessible for pitching the story? What angle would he adopt and how to influence him?
When the news media come calling for information and comments, the company should offer full cooperation; and the spokesperson should be ready with facts and figures or promise to provide the data promptly to meet the reporter’s deadline.
Information should be provided thoughtfully and judiciously. It is difficult to undo or correct the information once it is out.
Providing reliable and prompt information is one of the best ways to build bridges with the news media; when the need arises, the company can count upon the media good will.
Most of all, do not be caught with your hands in the cookie jar. And play honest golf.