IN­DIA’S SEMI- CAP­I­TAL­ISM

India Today - - UPFRONT -

At its best, In­dian cap­i­tal­ism is a world­beater. At its worst, it is self- de­struc­t­ing. In their own and very dif­fer­ent ways In­fosys and BCCI are per­fect ex­am­ples of how, in In­dia, the suc­cess of an en­ter­prise can so eas­ily lay the seeds of its down­fall. At its peak, In­fosys wasn’t just the poster child of the In­dian IT in­dus­try. It was, in fact, a role model of In­dian cap­i­tal­ism. It show­cased the po­ten­tial of raw en­ter­prise which grew with­out any sup­port from the Govern­ment. It proved that an In­dian com­pany could de­liver world- class ser­vices. But per­haps, most im­por­tantly, in the pe­cu­liar con­text of In­dian busi­ness, it was a stand­out ex­am­ple of a truly mod­ern com­pany, one that was not con­trolled by a sin­gle fam­ily or a dom­i­nant share­holder. None of the founder- pro­mot­ers of In­fosys holds big stakes ( 5- 6 per cent mostly). Infy was short­hand for what other busi­nesses wanted to be­come when they grew up.

Un­til, of course, the com­pany made the ex­tra­or­di­nary de­ci­sion to re­call its founder- CEO, N. R. Narayana Murthy, as ex­ec­u­tive chair­man. There is no doubt that Murthy shaped In­fosys. Un­like other In­dian lead­ers, he ac­tu­ally stepped aside when the go­ing was good, hand­ing over the reins to Nan­dan Nilekani, who in turn stepped down af­ter a five- year ten­ure in favour of fresher minds. Un­for­tu­nately, In­fosys missed a trick by me­chan­i­cally pass­ing the ba­ton on to each of the founders. The firm ef­fec­tively closed the door on out­side tal­ent which could have taken it to the next level of suc­cess. In the event, In­fosys be­gan to de­cline, chal­lenged by ad­verse mar­ket con­di­tions in the West, high em­ployee at­tri­tion rates and an in­abil­ity to move up the value chain ( i. e. the next level).

The de­ci­sion to re- in­duct Murthy seems a des­per­ate at­tempt to cling to a once glo­ri­ous past. Sadly, it has flouted best prac­tice norms. At al­most 67, Murthy is above the age of re­tire­ment ( 65) stip­u­lated for non- ex­ec­u­tive di­rec­tors. In­cred­i­bly, he has in­sisted on the ap­point­ment of his son Ro­han as his ex­ec­u­tive as­sis­tant. Surely, Murthy could have picked a tal­ented young­ster for this role, with­out suc­cumb­ing to nepo­tism. In the end, Murthy may or may not make a dif­fer­ence— re­mem­ber the con­text for the IT in­dus­try now is very dif­fer­ent from when he was last at the helm— but his re­turn has ex­posed not just In­fosys but the lack of ma­tu­rity in In­dian cap­i­tal­ism.

Un­like In­fosys, BCCI was never a shin­ing ex­am­ple of good cor­po­rate prac­tices. But it was a pow­er­ful ex­am­ple of en­trepreneur­ship against the odds. It took some ge­nius to make In­dia the fi­nan­cial su­per­power of cricket in the short span of a decade, over­turn­ing 100 years of dom­i­nance by Eng­land and Aus­tralia. That it hap­pened in the 1990s ( well be­fore the eco­nomic boom of the 2000s) makes the feat more im­pres­sive. The mas­ter­mind of In­dian cricket’s suc­cess story then was Jag­mo­han Dalmiya. Like Murthy, he has made a stun­ning come­back. But it will not change BCCI.

The BCCI needs to now evolve into a pro­fes­sional cor­po­rate en­tity. For that, its man­age­ment needs to be freed from the con­trol of a hand­ful of pow­er­ful in­di­vid­u­als ( in­clud­ing Dalmiya and Srini­vasan who act like own­ers, not man­agers), just like In­fosys’s man­age­ment needs to be freed from its founders. The world’s best com­pa­nies are run by pro­fes­sional man­agers, not own­ers. De­spite its con­sid­er­able suc­cess, In­dian cap­i­tal­ism still has a long way to go.

IN THE END, MURTHY MAY OR MAY NOT MAKE A DIF­FER­ENCE— RE­MEM­BER THE CON­TEXT FOR THE IT IN­DUS­TRY NOW IS VERY DIF­FER­ENT FROM WHEN HE WAS LAST AT THE HELM— BUT HIS RE­TURN HAS EX­POSED NOT JUST IN­FOSYS BUT THE LACK OF MA­TU­RITY IN IN­DIAN CAP­I­TAL­ISM.

DHI­RAJ NAY­YAR

SAU­RABH SINGH / www. in­di­a­to­day­im­ages. com

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