Recently we have completed the first corporate week (December14-December2009) in our country on behalf of Ministry of Corporate affairs, Government of India; the initiative indeed shown partially the optimization of politics and economics with a voice for practices of Corporate Social Responsibility (CSR).
In a recent survey of AC Nielson on CSR, India ranked on fourth position where Australia viewed as best place of CSR initiative; on cards at least it gives India a remarkable position in comparison of other surveys on social indices where its terribly lag behind from its actual occupation potential. Possibly some causes of such poor state of affairs could be attributed to the fragile civil consciousness and low CSR initiatives by most of the leading corporates who enjoyed the resource generating helm of affairs but remains oblivious with the near by abysmal conditions.
Few months back I was passing through survey of a leading Indian publication on the proportions of slums in major tier-I Indian city; it terribly struck me to know that over fifty six percent of India’s most affluent commercial city, Mumbai’s population is constituted through these inhuman slums…more or less this is an universal reality of other city as well nevertheless of the genuine fact that Indian nation state has meanwhile progressed a lot and able to create a solid middle class with substantial purchasing capacity in country.
Alas! If same attention could be materialized on this bottom of pyramid section on which the management thinker C.K.Prahlad found immense opportunities by upheavelling those from their very sad dwellings through major waves of innovations although temporarily we have only a virtual and Hollywood imposed celluloid vision of these viciousness through high techniques and commercially manipulated realities which widely accepted as blockbuster (Slum dog Millionaire)…this cinema eventually fetched some Oscars recognition to India and only after that grab the rapt attention of neighboring dwellers who hitherto have been not able to see the abject poverty from their posh housing societies.
What I mean to say by all these narration that our major chunk of population are being accustomed of virtual reality and they can be sensitized only through the virtual images rather spontaneity of their consine to oversee on any grave matters; unfortunately they are completely lacking the direct touch with the most of issues and even they also here missed to replicate their crucial bandwagon, western counterparts who support at best for any maneuvering of social security causes in their country.
Indeed we have urgent need to thrive and strive as priority to not shaping the CSR initiatives as pipe dream since peoples and planet is as important as earning profits or any other lucrative incentives; so it should never seen as a diversionary tactics nor only be practiced as boardroom phenomenon, its need of performing in real terms with finest intentions.
It’s worthwhile to note that corporate governance is mandatory practice in any company unlike the CSR which is entirely optional in nature with motives to strengthen the much needed tolerance between social and corporate interests; so practices of CSR most often struck with tougher realities.
Quotation of Milton Friedman could be sited in tune with the prevailing circumstances in corporate world “Corporates and corporate promoters have single constituency called stakeholders”- that’s enough to cover the canopied adverseness albeit we have some exceptions like- Tata, Amul, ITC-echaupal, Infosys, Microsoft, google etc where there dids compel us to differentiate between good corporates and fragile corporates.
Like many other things, it’s also visible in CSR case that India is the land of dual reality; we have both sort story in our record where Tata could be a formidable example of finest CSR practices through its numerous initiatives in town planning (Jamshedpur), Education (TIFR, TISS, IISc, TERI etc), health (Tata Memorial Hospitals) etc.
At many front they displayed their commitments for nation building and indeed tried best to converge corporate achievements with national pride, other side of story is strikingly contrast where we have to confront with the unethical face of governance and of- course bad CSR in most recent case of SATYAM INFOTECH where they even jeopardized their initial good works, and in past, U.S companies-UNION CARBIDES & DOW CHEMICALS which distorted the psyche of entire humanity through their havocking acts and cheating with the Bhopal gas tragedy.
It’s becoming very imperative to be more focused on social responsibility through a multi-pronged channel consists with active initiatives from government, industry, civil society, NGOs, individuals etc to impart a finer balances in our dual reality. We must strive for a successful society because a business or any other deliberation can’t be succeed in a rogue social atmosphere-every political theory, either its Utilitarianism, Communism and even Capitalism teach the basic principles of common goods and dreams for a healthy society.
After all we shouldn’t forget that the father of modern capitalism and its pioneer economic theorist-Adam Smith had written his first book named as “Theory of Moral Sentiments (1757)” much before the magnum opus “Wealth of Nation”-no doubt that he had been teaching through out his work, the self interest of business entities but his voice also happened equally resonant against the selfish interests of them…this subtle caveat is worthwhile of consideration today.
It would be a prudent move for the time being to all business players to look back in the basic principles of modern existing economic theories since we are really facing very hard time at the ethical sides of businesses-Wall Street crisis, Ponzi schemes, Dubai crisis and many more may be in near future since the bad gambling in financial sector is far from being halted, that necessitates to draw a lucid framework for adoption of CSR as a mandatory practices unlike the present optional mode.
In Indian case, role of the CSR is utmost strategic to address the plights of bottom of pyramids who hitherto have been dwelling in stark unfortunate circumstances-what they need an all round support and innovations like no-frills financial access and entrepreneurship qualities to raise themselves from the vicious circle of life. Wishing, to see CSR out of ceremonial facades and its better involvement with real developmental issues.
Atul Kumar Thakur
December24th 2009, New Delhi
atul_mdb@rediffmail.com
Showing posts with label Business Ethics. Show all posts
Showing posts with label Business Ethics. Show all posts
Thursday, December 24, 2009
Monday, August 17, 2009
Bumpy Quivering In Indian Mutual Fund Industry
As on July end, the Indian Mutual fund industry manages an asset base of RS 6, 86,946 crore which seems quite impressive in first impression but an in-depth introspection reveals this performances as below of actual potential of presently existing thirty six fund houses. It’s not less surprising that top five Mutual funds houses accounting for over fifty present of the total asset base, so there is huge scopes persist for entry of new players in Mutual fund industry.
According to a recent report of The Economic Times, twenty six funds waiting for approval of business before SEBI (Security and Exchange Board of India); expected potential for more players foraying into the Mutual fund space may lead this industry for stronger consolidation.Mutual fund industry despite having an existence of fifteen years has yet to secure its position as a formidable player in the domain of financial services.
Now the going away of entry load will leave greater obstacles before industry players in attracting the investors. Scrapping entry loads has apparently put Mutual funds at a disadvantage vis-à-vis viable products like ULIPS at the distribution end. Before August 1st, Mutual funds were charging an entry load of 2-2.5% and paying a commission of around 3% to their distributors that mean fund houses had to burn around the cost of 50 to 100 basis point. Such proportion of cost for Asset Management Company was quite low which now they wouldn’t longer afford in the wake of new SEBI ruling.
Even though withering of entry load by SEBI is logical for the sake of investor’s interest as previously availing with fixed nature of commission hardly compelled distributors and Independent Financial Advisors for better consultancy to investors. In absence of adequate information generally investors couldn’t secure there intended benefits from investment.
Now the Mutual fund distribution set to become more demand based rather than sales push, so the time is ripe for investors to be more careful as distributors might push other products such as ULIPS more at least in short term. Indeed the new ruling will lead market towards stiff competitive regime in which the investor will have greater voice although that would require a better financial literacy scenario which at present is quite unsatisfactory in India.
On the other end new SEBI ruling will adversely affect the Mutual fund industry as the overall distribution network is going to face severe challenges; risk has arises of small distributors losing their business and large distributors getting consolidated. Even before the implantation of new ruling Mutual fund industry lacked the distribution network to cover the entire country in a meaningful manner; some plans are in the air for establishing the grand distribution and trading platforms.
Such materialization would of course mitigate the long pending sluggishness of proper distribution network but that must not oust the IFA’s role; they must have to co-exist for further deliberation.In the new set of condition it would be quite imperative to have a triangular interface amidst the Mutual fund , investors and distributors with a consensus based settlement of commission and various other impetus; certainly it would be require disclosure norms more tightened and transparent. There must be a definite set of rules that apply equally to similar products irrespective of seller’s identity.
Apart from the challenges of new directives from SEBI, existences of some non-serious players in the business are equally posing serious concern over the maximization of its reach in financial market.
It seems quite astonishing after passing through the facts regarding very low requirements (Rs 10 crore) to start a Mutual fund unlike the Banking or Insurance business. Despite such hassle free monetary norms; leaders in Mutual fund couldn’t visualize the need for its pan Indian presence like the counterpart’s Bank and Insurance. Presently majority of Mutual funds business comes from corporate (around 70%); here the Mutual funds business urgently needed for some stringent regulatory mandate like rural penetration of business like the counterparts in financial services.
As per a survey of Value research ( An independent research and analysis institution), the industry’s present penetration is estimated at 4.5% as against 10-15% of Insurance business; there are around 3 million agents for Insurance products and just 80,000 distributors for Mutual funds. Indeed both have their own strength and weakness of business but at the moment Mutual fund industry required a tectonic shift in their products distribution in enhanced innovation and co-operation with Banks and Insurance sector.
Mutual fund industry by remodeling many products can leverage upon Insurance’s distribution networks since both are ‘push’ products. Structural changes in selling practices and better offers of reward in distribution network would be a crucial impetus in sustaining and rising of falling esteems in this business.
Today Mutual fund industry is standing at crossroads where it has to cope with many swiftly approaching challenges including a very consistent stiff competition from Insurance industry. Insurance businesses are in win-win situation in comparison of Mutual funds as they availing the traditional edge of being a tool of tax saving besides having a wide network of its distribution channels lead this industry to every threshold in both the urban and rural spaces in equal manners.
To gain an actual breakthrough, potential think tanks of Mutual fund sector should reassess their ongoing business model in terms of targeted breakthrough and further marched towards the comprehensive diversification. Diversification's in the sense, that it would reduce any adverse exposure from a specific sector and would mitigate other invisible travesty.Probably this lesson is most rational after suffering a chronic, meltdown of international financial system which not only raises question on the confined treatment of financial planning but also showed the solution in a diversified and transparent way of business behavior.
Indian market has a huge potential for the growth of Mutual fund business but it would require first to decipher the codes of investor’s expectation from the products. More and more adaptation with the Indian condition would harness the success story; fewer amounts of frills along with the greater amount of ethics and trust would be matched with the genuine plight of this growing sector.
Atul Kumar Thakur
17th August2009, New Delhi
atul_mdb@rediffmail.com
According to a recent report of The Economic Times, twenty six funds waiting for approval of business before SEBI (Security and Exchange Board of India); expected potential for more players foraying into the Mutual fund space may lead this industry for stronger consolidation.Mutual fund industry despite having an existence of fifteen years has yet to secure its position as a formidable player in the domain of financial services.
Now the going away of entry load will leave greater obstacles before industry players in attracting the investors. Scrapping entry loads has apparently put Mutual funds at a disadvantage vis-à-vis viable products like ULIPS at the distribution end. Before August 1st, Mutual funds were charging an entry load of 2-2.5% and paying a commission of around 3% to their distributors that mean fund houses had to burn around the cost of 50 to 100 basis point. Such proportion of cost for Asset Management Company was quite low which now they wouldn’t longer afford in the wake of new SEBI ruling.
Even though withering of entry load by SEBI is logical for the sake of investor’s interest as previously availing with fixed nature of commission hardly compelled distributors and Independent Financial Advisors for better consultancy to investors. In absence of adequate information generally investors couldn’t secure there intended benefits from investment.
Now the Mutual fund distribution set to become more demand based rather than sales push, so the time is ripe for investors to be more careful as distributors might push other products such as ULIPS more at least in short term. Indeed the new ruling will lead market towards stiff competitive regime in which the investor will have greater voice although that would require a better financial literacy scenario which at present is quite unsatisfactory in India.
On the other end new SEBI ruling will adversely affect the Mutual fund industry as the overall distribution network is going to face severe challenges; risk has arises of small distributors losing their business and large distributors getting consolidated. Even before the implantation of new ruling Mutual fund industry lacked the distribution network to cover the entire country in a meaningful manner; some plans are in the air for establishing the grand distribution and trading platforms.
Such materialization would of course mitigate the long pending sluggishness of proper distribution network but that must not oust the IFA’s role; they must have to co-exist for further deliberation.In the new set of condition it would be quite imperative to have a triangular interface amidst the Mutual fund , investors and distributors with a consensus based settlement of commission and various other impetus; certainly it would be require disclosure norms more tightened and transparent. There must be a definite set of rules that apply equally to similar products irrespective of seller’s identity.
Apart from the challenges of new directives from SEBI, existences of some non-serious players in the business are equally posing serious concern over the maximization of its reach in financial market.
It seems quite astonishing after passing through the facts regarding very low requirements (Rs 10 crore) to start a Mutual fund unlike the Banking or Insurance business. Despite such hassle free monetary norms; leaders in Mutual fund couldn’t visualize the need for its pan Indian presence like the counterpart’s Bank and Insurance. Presently majority of Mutual funds business comes from corporate (around 70%); here the Mutual funds business urgently needed for some stringent regulatory mandate like rural penetration of business like the counterparts in financial services.
As per a survey of Value research ( An independent research and analysis institution), the industry’s present penetration is estimated at 4.5% as against 10-15% of Insurance business; there are around 3 million agents for Insurance products and just 80,000 distributors for Mutual funds. Indeed both have their own strength and weakness of business but at the moment Mutual fund industry required a tectonic shift in their products distribution in enhanced innovation and co-operation with Banks and Insurance sector.
Mutual fund industry by remodeling many products can leverage upon Insurance’s distribution networks since both are ‘push’ products. Structural changes in selling practices and better offers of reward in distribution network would be a crucial impetus in sustaining and rising of falling esteems in this business.
Today Mutual fund industry is standing at crossroads where it has to cope with many swiftly approaching challenges including a very consistent stiff competition from Insurance industry. Insurance businesses are in win-win situation in comparison of Mutual funds as they availing the traditional edge of being a tool of tax saving besides having a wide network of its distribution channels lead this industry to every threshold in both the urban and rural spaces in equal manners.
To gain an actual breakthrough, potential think tanks of Mutual fund sector should reassess their ongoing business model in terms of targeted breakthrough and further marched towards the comprehensive diversification. Diversification's in the sense, that it would reduce any adverse exposure from a specific sector and would mitigate other invisible travesty.Probably this lesson is most rational after suffering a chronic, meltdown of international financial system which not only raises question on the confined treatment of financial planning but also showed the solution in a diversified and transparent way of business behavior.
Indian market has a huge potential for the growth of Mutual fund business but it would require first to decipher the codes of investor’s expectation from the products. More and more adaptation with the Indian condition would harness the success story; fewer amounts of frills along with the greater amount of ethics and trust would be matched with the genuine plight of this growing sector.
Atul Kumar Thakur
17th August2009, New Delhi
atul_mdb@rediffmail.com
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