President Mukherjee said, people have voted for a united, strong and modern India, “Ek Bharat-Shreshta Bharat’’, and the Modi government will work to fulfil these aspirations
President Pranab Mukherjee on Monday said that, the Modi government at the Centre will work for development in a resurgent India in which corruption will have no place.
He said, “They (people of India) have voted for a united, strong and modern India —'Ek Bharat-Shreshta Bharat’ — My government will work to fulfil these aspirations, with the involvement of all the 125 crore people of this great country”.
The President was addressing the first joint sitting of Parliament, as required under the Constitution, after general elections that brought in the Narendra Modi Government last month.
In a word of assurance to minorities, the address said that the new government is committed to making all minorities equal partners in India’s progress.
The address is the political, economic and foreign policy roadmap of the Narendra Modi Government voted to power and covers virtually all the crucial areas, including the need to address the difficult economic situation in which inflation has to be reined in and growth reignited.
Mukherjee noted that the just-concluded election has been an election of hope.
“The surge in aspirations and the belief that these could be realised through democratic processes, have been amply reflected in the record 66.4% participation by voters and a clear verdict in favour of a single political party after a gap of nearly 30 years”, the President said.
“The electorate transcended the boundaries of caste, creed, region and religion, to come together and vote decisively in favour of ‘Development through Good Governance’,” he said.
Newly-elected Lok Sabha members and those belonging to the Rajya Sabha, Prime Minister Modi, his cabinet colleagues, former Prime Minister Manmohan Singh, Congress President Sonia Gandhi and other Opposition leaders heard the 50-minute speech with rapt attention, interspersed by occasional thumping of desks.
The President said putting the economy back on track is paramount. "The government will put it back into a high growth path, rein in inflation, reignite the investment, accelerate job creation and restore the confidence of the domestic and international community."
“My government will create a policy environment which is predictable, transparent and fair. It will embark on rationalisation and simplification of the tax regime to make it non-adversarial and conductive to investment, enterprise and growth.
“My government will make every effort to introduce the Goods and Services Tax (GST) while addressing the concerns of states. Reforms will be undertaken to enhance the ease of doing business. My government will follow a policy of encouraging investments, including through FDI, which will be allowed in sectors that help create jobs and assets,” President Mukherjee said.
On the foreign policy front, the President said that while the government was committed to work towards building a peaceful, stable and economically inter-linked neighbourhood, “we will never shy away from raising issues of concern to us at a bilateral level.
“We emphasise that the future of shared prosperity can only be built on the foundation of stability in the region, which requires sensitivity to security concerns and an end to export of terrorism to neighbours.”
Corporate governance in PSUs is negligible, while the prime motive of family run business is to maintain control and not produce profits for shareholders. So for increased returns on your investment, pick companies with the most corporate oversight and the best governance
Over the centuries judges in common law learned something about human nature. They realised that agents might not be particularly honest when acting on behalf of their principals. To remedy this problem, they created the highest duty under the law, a fiduciary duty, and assigned it to agents. This duty is now borne by all sorts of agents including trustees, employees, partners, and corporate officers. Wisdom of this judge-made law is confirmed by game theory. In game theory an agent’s best move is to cheat the principal.
For investors, the most important aspect of this concept is corporate governance. The basic idea of good corporate governance is to develop methods where the true owners of a corporation, its shareholders, have some sort of say over the agents running the corporation, the officers and directors.
Some of the basic principals include that executives and their pay should be accountable to shareholders. Companies should be transparent. Shareholders should exercise their stewardship over the companies they own by participating in all votes. Finally, investors should be more concerned about the long-term outlook for the company, in contrast to employees who know that their tenure may be limited.
Depending on the country, some of these concepts are either enshrined in law, regulations or sometimes listing contracts. Their importance is correlated with the distance between the owners and the officers. In small companies they are not needed because they owners are the officers. They are absolutely necessary though for widely held listed companies.
In the largest markets, the rights of the shareholders are often not exercised by them. These days they are often outsourced to large proxy advisors, who have become very powerful. Large fund managers are also the arbitrators of shareholder rights. This may concentrate power away from the final owners, but well-informed opposition to management might not be such a bad idea.
Even in the large well-developed markets, elites, not shareholders, call the shots. In France, corporate policy is often dictated by a combination of well-connected industrial families, state investment agencies, large unions, and last but not least the industry minister. Being an alumni of one of the three elite “Grand Ecoles”, whose networks Harvard alums can only envy, usually connect this web of government, union and corporate officers. Fortunately the power of this elite is breaking down. The reason is that foreigners, who insist on higher standards, now own half of the shares of the biggest French firms listed on the CAC-40.
Italy has had the same issues. There are no Grand Ecoles in Italy, but there is Mediobanca. Mediobanca is an investment bank at the center of a web of cross-shareholdings, shareholder pacts and nested stakes, that allow control despite ownership of relatively small shareholdings. Mediobanca is in theory selling many of its stakes in other companies, but old habits die-hard.
Italy may have problems, but it doesn’t compare to Japan. In Japan nearly 600 of the 1,400 listed firms still do not have any outside directors. In contrast China, South Korea and India, not paragons of corporate governance, all require them. Only 0.2% of Japanese listed companies had majority independent boards. In the US the number is 90%, 50% in the UK and 30% in Singapore.
As part of Prime Minister Abe’s third arrow reform efforts, there is a proposal to change the rules. The proposal includes guidance for appointment of independent directors. The provision is voluntary, but refusal requires explanation. The powerful Keidanren business lobby is opposing the provision. It has been successful in blocking all such proposals before.
Still Japan is far ahead of other Asian markets in one respect. It has the largest percentage of firms with diverse owners. Only 28% of Asian firms fall in this category and the vast majority are listed in Japan. Most firms in Asia are either state owned (40%) or family run (27%). Neither type of firm is known for allowing shareholders a major say in a company’s operations.
The probability for reform of corporate governance of state owned firms is negligible. For government officials, their largest asset is their potential for corruption and patronage. The largest listed Chinese and Indian firms each employ between a quarter and a half million people.
Family firms are equally difficult to change. Their prime directive is for the family to maintain control, not produce profits for shareholders. These firms are often excellent examples of crony capitalism. Large state owned banks are the source for cheap capital for both family and state owned firms. Seven of the ten largest firms in India have been tainted with corruption scandals. The ten most indebted firms account for 13% of the banking system’s bad loans.
So who cares? Why would investors or policy makers want to encourage good corporate governance anyway? The simple reason is money. Good corporate governance makes companies attractive to investors and makes them more profitable. The firms in the TOPIX 500 index had an average return on equity in 2012 of 7%, compared with over 15% for American and European companies. State run firms in Asia with their terrible corporate governance have lost a trillion dollars in value since 2007. Their aggregate PE ratio is half of private firms.
In developed markets, recent research has shown that the best governed companies did not out perform their peers, but the 10%-20% of firms with the worst corporate governance definitely underperformed.
So the conclusion is simple. If you want the best management team who will do the most to increase your investment, pick companies with the most corporate oversight and the best governance.
(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first-hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and speaks four languages.)
The tragedy of 24 students from an engineering college, who were washed away by the Beas River in Himachal Pradesh, calls for a deep introspection on why such tragedies keep happening
As per news reports, at least 24 students, including six girls from Vignana Jyothi Institute of Engineering and Technology (VNR) in Hyderabad, who were on a college trip to Manali were washed away by the strong water currents when there was a sudden discharge into the Beas River from a reservoir of the 126 MW Larji hydel power project around 2km away. The students were posing for photographs, when they were washed away by the water surge.
The Mandi district administration of Himachal Pradesh will investigate into whether people downstream were cautioned before releasing the water, but according to the students of VNR, there was no sign board to tell visitors that this was a dangerous area for visitors. However, nothing can replace the loss of lives of these precious youngsters. As of 3pm Monday, rescue workers had recovered five bodies, while the fate of 19 other students washed away in the sudden flood is still not known.
In India, water tragedies happen with regularity due to two chief reasons. Firstly, the department in charge of the water body hardly ever gives priority to putting up cautionary boards at strategic places or deploy patrolling to deter tourists from getting into the flood perimeter. Secondly, tourists, particularly youngsters, take unnecessary risks by getting too close to the water body, be it a lake, river or sea in their enthusiasm for taking photographs on cliffs of hills and hill slopes. No amount of warning by the police or life guards helps, and in their exuberance think such tragedies happen only to someone else. Such scenes are particularly seen during monsoons, which is also the most dangerous time in the mountains
During my recent Goa trip, a Jeep with the Life Guard and his team inside it, was driving up and down the sea shore of the Baga Beach, appealing through his megaphone to step back from the waters. It was around 6pm and the person on the mike was imploring the vacationers not to risk their lives. “The water level has become dangerous;” “you may be suddenly swept off by the sea;” “that your stupid courage could end in a water tragedy;” “please listen to what I am saying, please get off.” However, we were aghast to see families with young children refusing to budge. Some mocked at the Jeep when it came around one last time. The Life Guard on the mike said - “this is the last warning to you. Please do not play with your life.” It had hardly any effect as at least one-fourth of the crowd continued to revel in the noisy waves that hit the shores. While that evening was lucky for everyone, last year, on a beach in Goa, five Pune-based techies were drowned during a picnic.
A similar scene can be witnessed in various monsoon picnic spots of Maharashtra. Lonavala-Khandala is a particularly scary example, when around one lakh people, most of them youngsters, come to get drenched in the rains during weekends. Bhushi Dam, which is the star attraction, invariably registers six-seven deaths due to drownings every season. The Lonavala Police has been issuing warning signs, using blaring loudspeakers and pamphlets; local youth organizations volunteer to be guards; caution boards too dot the area but hardly anyone pays attention to them. Drowning deaths also occur at the foots of various gushing waterfalls, not only in Lonavala-Khandala but in Malshej Ghat and several other popular monsoon picnic spots across Maharashtra.
Last year, while some of our family members were on a joyous boat ride in the backwaters of Kerala, their hearts froze when a bunch of youngsters were dancing on the rocking boat, creating a racket and trying to touch the water, thus tilting the lightly rocking boat every now and then. This could easily have led to the capsizing of the boat. Thank God it didn’t!
PS: This is not to pass the buck of the recent tragedy onto the the 24 students of Hyderabad College. They were caught unaware with the huge water release from the dam. This is the time to ponder, as monsoon sets in, to learn from earlier tragedies through self-restraint by adhering to safety norms.
(Vinita Deshmukh is consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte and is the author of “The Mighty Fall”.)