In its blog post, titled ‘Tweets Must Flow’, the San Francisco-based micro-blogging company has said that it could “reactively withhold content from users in a specific country” if legally required to do so
Washington: Twitter has announced that it can now selectively censor tweets on a country-by-country basis, a move which may augur well for India which reportedly urged social media websites to remove offensive contents, reports PTI.
In its blog post, titled ‘Tweets Must Flow’, the San Francisco-based micro-blogging company has said that it could “reactively withhold content from users in a specific country” if legally required to do so.
The proposed move came amid reports of a legal clash between India and global Internet giants, including Google, Yahoo, Twitter and Facebook, over pre-screening user contents and removal of offensive materials from their websites.
A Delhi court had last month asked 21 social networking websites to remove derogatory content by 6th February this year.
In its blog, citing France or Germany which ban pro-Nazi content as examples, Twitter said: “As we continue to grow internationally, we will enter countries that have different ideas about the contours of freedom of expression.
“Starting today, we give ourselves the ability to reactively withhold content from users in a specific country—while keeping it available in the rest of the world.
“We haven’t yet used this ability, but if and when we are required to withhold a tweet in a specific country, we will attempt to let the user know, and we will clearly mark when the content has been withheld.”
However, the micro-blogging service with over 100 million active users, said the removed content would be available to the rest of the world. Earlier when it used to delete a tweet, it would disappear worldwide, media reports said.
Along with social media sites like Facebook, Twitter, which is currently banned in China, is said to have played a pivotal role in uprisings that swept the Middle East region, particularly in countries like Egypt and Tunisia.
I am not flatly saying, like many in the Left, that FDI in multi-brand retail will mean disaster for India. We have to be careful to take the good and keep out the bad. There are huge doubts about whether we can do it
“When you sup with the devil, make sure you have a long spoon”. India would do well to heed this proverb when the government finally decides on allowing 51% foreign direct investment (FDI) in multi-brand retail companies.
Only one multinational worries observers: A giant which seems to be both angel and devil. It is Wal-Mart.
If Wal-Mart was a country and its turnover is taken as its gross domestic product (GDP), it would be ranked eighth or ninth in the world. If a corporate entity can have a psyche, Wal-Mart is psychotic about two things. First, keeping the prices of its products incredibly low to give metaphorically gold-plated gifts to its customers. Second, making its suppliers deliver products at these low prices; if the suppliers cannot afford to sell at Wal-Mart’s prices and have to close down as a consequence, bad luck to them.
First, the bad news.
In the first decade after Wal-Mart opened its first mall in the state of Iowa in US, 1,845 small and medium-small shops and stores were forced to close down. All of them shut down due to the predatory tactics of Wal-Mart.
The state lost 555 grocery stores, 298 hardware stores, 293 building supply stores, 161 variety stores, 158 women’s apparel stores, 153 shoe stores, 116 drugstores and 111 men’s and boys’ apparel stores.
All of them were forced into closure because of Wal-Mart’s predatory pricing or because they were Wal-Mart’s suppliers and could not deliver at the prices Wal-Mart demanded. (Source: Iowa State University Study on Wal-Mart)
Now the good news: A 2005 Washington Post story reported that “Wal-Mart’s discounting on food alone boosts the welfare of American shoppers by at least $50 billion per year.” It means US consumers gained $50 billion a year because they shopped in Wal-Mart which offered food items at much lower prices than any other retail giant.
Rahul Gandhi and his friends in Indian business and industry are not talking about the dark side of Wal-Mart. Rahul seems to believe that farmers in the hinterland of Wal-Mart malls, and those of other big retailers of the US, will get a much better deal than at present.
I am not saying that Wal-Mart and other big retailers of the world should be kept out. I am not flatly saying, like many in the Left, that FDI in multi-brand retail will mean disaster for India. The point here is to highlight the good and the bad about retail FDI. We have to be careful to take the good and keep out the bad. There are huge doubts about whether we can do it.
Wal-Mart’s competitors have tried to sue it for predatory pricing (intentionally selling a product at low cost in order to drive competitors out of the market). Wal-Mart won some cases and others were settled out of court.
In 2003, a German high court ruled that Wal-Mart’s pricing “undermined competition” and ordered Wal-Mart and two other supermarkets to raise their prices. Wal-Mart won an appeal of the ruling. Then the German Supreme Court overturned the appeal. Wal-Mart has since sold its stores in Germany.
Wal-mart has been accused of using monopsony power to force its suppliers into self-defeating practices. Wal-mart’s constant demand for lower prices caused Kraft Foods to shut down thirty-nine plants, sack 13,500 workers, and stop producing a quarter of its products.
Vlasic’s pickles is a classic case of Wal-Mart destroying its own suppliers. It is best to quote from a case study of Wal-Mart and Vlasic: “A gallon-sized jar of whole pickles is something to behold. The jar is the size of a small aquarium. The fat green pickles, floating in swampy juice, look reptilian, their shapes exaggerated by the glass. It weighs 12 pounds, too big to carry with one hand. The gallon jar of pickles is a display of abundance and excess; it is entrancing, and also vaguely unsettling. This is the product that Wal-Mart fell in love with: Vlasic’s gallon jar of pickles.”
Wal-Mart priced it at $2.97—a year’s supply of pickles for less than $3! “They were using it as a ‘statement’ item,” says Pat Hunn, who calls himself the ‘mad scientist’ of Vlasic’s gallon jar. “Wal-Mart was putting it before consumers, saying, “This represents what Wal-Mart’s about. You can buy a stinkin’ gallon of pickles for $2.97. And it’s the nation’s number-one brand.”
“Therein lies the basic conundrum of doing business with the world’s largest retailer. By selling a gallon of kosher dills for less than most grocers sell a quart, Wal-Mart may have provided a service for its customers. But what did it do for Vlasic? The pickle maker had spent decades convincing customers that they should pay a premium for its brand. Now Wal-Mart was practically giving them away. And the fevered buying spree that resulted distorted every aspect of Vlasic’s operations, from farm field to factory to financial statement.”
“Indeed, as Vlasic discovered, the real story of Wal-Mart, the story that never gets told, is the story of the pressure the biggest retailer relentlessly applies to its suppliers in the name of bringing us “every day low prices”. It’s the story of what that pressure does to the companies Wal-Mart does business with, to US manufacturing, and to the economy as a whole. That story can be found floating in a gallon jar of pickles at Wal-mart.”
R Vijayaraghavan has been a professional journalist for more than four decades, specialising in finance, business and politics. He conceived and helped to launch Business Line, the financial daily of The Hindu group. He can be contacted at [email protected].)
The guidelines on bank CEOs’ compensation lack clarity and call for a re-look in respect of private banks. And given the huge disparity in remuneration existing between private and public sector banks, RBI should consider realigning the remuneration of CEOs of public sector banks also in tune with the principles enunciated by the Basel Committee on Banking Supervision
The guidelines announced by Reserve Bank of India (RBI) recently in respect of compensation to whole-time directors and CEOs (chief executive officers) of private and foreign banks are in the direction of streamlining the system on the international principles, following the report of the Basel Committee on Banking Supervision and gives food for thought for the boards of private banks, as they were groping in the dark so far. Besides, there was no rational basis for the RBI to approve or disapprove proposals received from the banks recommending fancy salaries to their CEOs, resulting in considerable disparity in compensation of CEOs of private banks, especially between old and new generation banks.
However, the RBI appears to have missed the woods for the trees as a few areas of executive compensation, which have a great relevance in the Indian context, are conspicuous by their absence. More so because, the compensation structure of CEOs of public sector banks is not even being attempted to be covered under the new dispensation without any rhyme or reason.
Firstly, it is stipulated that effective alignment of compensation with prudent risk taking, i.e. compensation should be adjusted for all types of risk. Banking is basically a business of risk taking. From the branch manager right up to the CEO, everyone is required to take risks in his/her day-to-day functioning, as without taking a risk, you cannot run a bank. There are committees and committees to lay down guidelines for risk management and exposure norms, which are approved by the board of the bank and in some cases; even approved by the RBI. In view of this it would have helped matters, if the RBI had included in their guidelines a few quantitative parameters also to assess the element of risk which should be aligned to the compensation.
Secondly it states that the deterioration in the financial performance of the bank should generally lead to contraction in the total amount of variable remuneration paid. Here the RBI has willy-nilly omitted to furnish the parameters for assessing the financial performance of the bank, and has not indicated even remotely, the expectations of RBI in evaluating the performance of the bank. Any performance can be assessed on different parameters with differing results. Banking in our country is not judged purely on the basis of a single yardstick of bottomline alone, though their share price may move in tandem with the net profits declared by the bank quarter after quarter. What is of paramount importance is that there should be uniformity in evaluating the performance of the banks taking into account the external environment as well.
Thirdly, the guidelines stipulate that the banks are required to ensure that the fixed portion of the compensation is reasonable, taking into account all relevant factors, including the industry practice. What appears reasonable to one may not appear reasonable to another. At present the industry is full of distortions and there is no uniform practice to fall back upon. The guidelines could have been more specific or given general indications to arrive at a reasonable compensation that would have appeared more rational. Here it is appropriate to recall what NR Narayana Murthy, chairman emeritus of Infosys stated a few years back. He said that there had to be fairness in CEOs’ compensation in relation to the compensation of other employees. In effect, there cannot be huge difference between the top-most and the bottom rung of the ladder within an organization. The RBI could have given some such guidance so that the banking industry could have set a trail-blazing new trend in this sensitive area of the economy and given a new orientation to the whole concept of executive remuneration for others to emulate.
The guidelines of RBI are applicable only for private and foreign banks and do not apply to public sector banks, though they control nearly 70% of the banking business in our country. In PSU banks the risk-reward ratio is totally skewed in favour of the bank and the CEO has not only to take the risk but also face the risk of being questioned for his decisions, that too after the event. And the reward they get for this double whammy is no comparison with the private sector. In all fairness, the RBI should persuade the central government to change the entire system of CEO remuneration prevailing at present in PSU banks and suggest an innovative performance-oriented system, that would have driven the banks to perform better and served the cause of the banking industry admirably.
Any discussion on CEOs’ remuneration in banks would be incomplete without mentioning the unique example of Vikram Pandit, CEO of Citibank of the United States. When he found that his bank was in dire straits, he volunteered to accept a remuneration of $1 only for the whole year till the turnaround in the fortunes of the bank is achieved. This is a great example of personal sacrifice exhibited, maybe for the first time in the western world, by none other than a person of Indian origin, speaks volumes of how a seasoned banker can lead by example. Nearer home, we have the example of Mr Ananthakrishna, of Karnataka Bank. who has voluntarily foregone his remuneration of Rs1 lakh a month, when he was appointed as its non-executive chairman in July 2009.
Though these are rare examples of personal sacrifice for the sake of the institution, there is no gain saying that the CEO compensation in public sector banks too needs to be realigned in tune with the principles enunciated by the Basel Committee on Banking Supervision, and the RBI should at least initiate a debate in this regard in the larger interest of developing the banking industry on healthy lines in our country.
(The author is a banking and financial consultant. He writes for Moneylife under a pen-name ‘Gurpur’)