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  • TruTh is ofTenThe firsT casualTyin our fraughT Times.CFO India finds out what happens whenthe truth is spoken to power and what lies ahead.

    No Achilles heelVinod Rai, foRmeR CaG P. 20

    Why do people lie?amit BuBna, PRofessoR, isB P. 17

    WAitiNg for godotsamiR BaRua P. 24

    Volume 01 issue 0175

    noV/deC. 2013

    a 9.9 media PuBliCation

    4th AnniversAry speciAl

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  • TRUTH IS OFTENTHE FIRST CASUALTYIN OUR FRAUGHT TIMES.CFO India finds out what happens whenthe truth is spoken to power and what lies ahead.

    WH

    Y DO

    PEOPLE LIE? 17

    NO

    AC

    HILLES H

    EEL 20

    ISSUE

    VO

    LUM

    E

    01

    01

    CF

    O I

    ND

    IA

    WA

    ITING

    FOR

    GO

    DO

    T 24

    NO ACHILLES HEELVINOD RAI, FORMER CAG P. 20

    WHY DO PEOPLE LIE?AMIT BUBNA, PROFESSOR, ISB P. 17WAITING FOR GODOT

    SAMIR BARUA P. 24

    VOLUME 01 ISSUE 0175

    NOV/DEC. 2013

    A 9.9 MEDIA PUBLICATION

    4th ANNIVERSARY SPECIAL

    Cover design Binesh sreedharan

    04 | From the Editors Desk

    COVER STORY08 | The Day I Spoke the Truth12 | The Truth that is Never Spoken17 | Incentives to Lie - Amit Bubna

    PROFILES20 | Vinod Rai24 | Samir Barua28 | Santosh Hegde32 | TSR Subramanian36 | S Ramadorai38 | Swraj Paul40 | Deepak Ghaisas42 | Ravi Sud43 | EAS Sarma44 | Sanjeev Bikhchandani46 | Luis Miranda48 | Neeta Revankar50 | Sathya Kalyanasundaram52 | Bharat Karnad53 | Gulshan Dua54 | Rostow Ravanan56 | Yogesh Dhingra57 | Charanjit Attra58 | AR59 | Alok Kejriwal

    CARTOON STORY66 | Speaking Truth to Power

    4thAnniversAry

    speciAl

    shalini s. dagar illustration By manav saChdev

    SPEAKING TRuTH TO POwERThe CFO is often known as the conscience keeper of the entire organisation. Should he be the only one though? Our take on the difficulties of being a CFO. A day in the life of a CFO..

    Speaking Truth to Power

    subscriber services:

    Call +91-120-4010999

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    Managing Director: Dr. Pramath raj Sinha

    EditorialEditor: anuradha Das MathurManaging eDitor: Shalini S. DagaraSSiStant eDitor: Parimal Peeyush

    dEsignsr. creative Director: Jayan K narayanansr. art Director: anil vKaSSociate art Director: anil tsr. viSualiSerS: Manav Sachdev, Shokeen Saifi & sristi MauryaViSualiSer: nv Baijusr. DeSignerS: Shigil narayanan, Haridas Balan& Manoj Kumar vPdeSignerS: charu Dwivedi, Peterson PJ, Pradeep g nairdinesh Devgan & vikas SharmaConSulting Sr. art Director: Binesh SreedharanMarCoMdeSigner: rahul BabustUdioChief PHotograPHer: Subhojit Paulsr. PHotograPHer: Jiten gandhi

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    Volume 01 | Issue 01 | NoVember/december 2013

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  • 44 C F O i n d i a n o v e m b e r - d e c e m b e r 2 0 1 3

    The anniversary issue of CFO India pushes the envelope each year - for creativity in action and thought.This

    years theme speaking the uncomfort-able truth, beats all previous ones. As we explored delivering on this issue a Pandoras Box opened up making the theme even more compelling than originally envisaged. Not surprisingly, we uncovered more dilemmas than

    answers... many of these have been thought provoking for us, and we hope, will be for you, too.

    Our first stark realisation came almost as soon as we began; that there are ques-tions that precede the issue of voicing the uncomfortable truth and these needed to be acknowledged before we took the next step. Each question, how-ever, led to another deeper one, and was accompanied by an uncomfortable,

    inconvenient realisation. Join me on the reflective roller-coaster

    To begin with, what do we care about more - being ethical or being compliant?

    Instinctively, one would expect that these go hand-in-hand. However, experi-ence, anecdotes and contemplation sug-gest that you could be one without being the other. In such instances, what wins? Let me explain this with an example.

    The battle between sales teams and

    from the editors desk

    Uncomfortable, inconvenient truths and more...

  • 55n o v e m b e r - d e c e m b e r 2 0 1 3 C F O i n d i a

    Anuradha Das Mathur, Editor, CFO India

    from the editors desk

    finance teams is eternal. The pressure to show growth and superior perfor-mance is understandable and leads to questions on when you should record revenues. Is booking a sale enough or should you wait until the product/ser-vice has been delivered satisfactorily to the client?

    Both are compliant with the law but do they serve the spirit of the law in the same measure? Not quite. The lat-ter is likely to knock at your conscience.

    But, given the ability of the skillful professional and the human mind to rationalise, in many instances, the sales organisation wins because their focus on higher reveneus is externally benefi-cial and also compliant.

    Clearly, compliance is an objec-tive for a number of practical reasons for businesses and individuals; most importantly, to avoid becoming a vic-tim of the law. Violating the law can get you into jail, hurt your business and cause you loss - both material and time-wise. On the other hand, not following the spirit of the law only causes con-flict with the conscience - for those of us who have one left by the time we are senior executives.

    And one of our significant discoveries in the journey of this issue was - most people have learnt to short-change their conscience, while more and more peo-ple are committed to compliance.

    Going forward, will compliance and ethics come closer in terms of the law and processes, so that both are co-ter-minus? That one cannot be compliant without also doing the right thing - would that serve our interest? Would we even support such a move? And if not, why not?

    And this led to the next significant question What comes in the way of doing the right thing? Is it our obses-sion with convenience?

    Prima facie, it seems we are obsessed with convenience or being practi-cal and will justify almost anything on this score. In our personal and profes-sional lives, we do what is convenient as opposed to what is right or the good

    thing to do. We stay in jobs for longer than is productive because it is conve-nient, we tolerate mediocrity because it is convenient, we pull up people on performance but avoid conversations on their behavior because it is convenient, we dont move cities despite it being in our better interest, because of the premi-um on convenience. We eat pre-cooked meals, and put our parents in old age homes, all for the sake of convenience.

    Bren Brown, one of the most watched TED presenters talks about how emotions are inconvenient. They dont check with you before showing up they just do. If you choose to live a life of convenience, it is likely to be bereft of emotions. It isnt possible, neurologically, to numb ourselves selectively. So.

    Perhaps the pursuit of convenience wouldnt be such a sub-optimal thing, if we didnt short-change the pursuit of excellence or greatness - either as individ-uals or as companies. But we allow our-selves the convenience license since we live such fast-paced, demanding lives... we dont question our motivations often enough - to avoid dealing with the incon-venient or uncomfortable truth.

    That brings me to the third question. Do we have the courage to hear the

    uncomfortable truth even if we cant get around to speaking it?

    Well, very few of us do and there-fore, culturally, we dont ask for feed-back. Whether it is about the possible

    poor performance in our companies, or about a star employee hired with fanfare who is not working out as expected, or about how stressed we look and how we are impacting our teams adversely - we avoid asking the question so we dont have to hear what we already suspect is true. Often, it is avoided till it becomes a problem that is difficult to solve.

    As a society and as professionals, we focus too little on the problem and how to solve it, and too much on who is to blame. And to avoid personal attacks, we have mastered how to avoid diffi-cult but critical conversations. As a CFO you would see this in the context of taxa-tion. We have found a way to avoid as opposed to evade be compliant but not necessarily, do the right thing.

    And heres the final blow, whose truth and right by whom?

    In a VUCA world (volatile, uncertain, complex and ambiguous) - which is the new mantra for companies and execu-tives almost everything is grey. How then do you determine the truth? And under the cover of there being no black and white any longer, most of us find it far easier to rationalise situations and pick keeping our peace instead of speaking up. The combination of not really knowing whats right coupled with the inconvenience of addressing it, makes it simpler to side-step it and join the convenience brigade!

    While activism and whistle-blowers are on the rise, it is equally true that there are many more, today, who are happy to mind their own business than deal with the discomfort of ethics, intro-spection and uncomfortable truths.

    It might be time to gather some people who are happy to belong to an inconvenience brigade. At least, thats my view.

    But what do you think?

  • 6464 C F O I N D I A N O V E M B E R D E C E M B E R 2 0 1 3

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    2013 Thomson Reuters/ONESOURCE. All Rights Reserved.

  • 6565N O V E M B E R D E C E M B E R 2 0 1 3 C F O I N D I A

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    To find out more, visit tax.thomsonreuters.com/products/brands/onesource, call +91-22-40557080, or email [email protected]

    and comply wiTh indian Tax ReGulaTionS

    Benefit from Thomson Reuters Fast Facts, a suite of tax and accounting products that provides end-to-end compliance

    with complex Indian tax rules. Gain increased efficiency and improved accuracy with automation for:

    TDS management Payroll management Fixed asset management E-filing Digital signatures

    Our products are marketed and supported by authorised partners in these cities:

    Bangalore Chennai Delhi Hyderabad Kolkatta Lucknow Mumbai Nagpur Nashik Pune Raipur

    To find out more, visit fastfacts.co.in, call: +91-22-40557080, or

    email [email protected]

    2013 Thomson Reuters/ONESOURCE. All Rights Reserved.

  • TruTh is ofTenThe firsT casualTyin our fraughT Times.CFO India finds out what happens whenthe truth is spoken to power and what lies ahead.

    Anniversary Specialthe truth

  • WE started working on this an-niversary issue with some trepidation. In the best of times, it is a sensitive topicspeaking the truth and especially to powerful people. More so in charged times. Yet, in the last five years, the world has changed. And with it the expec-tations from companies. The pre-mium on clean has gone up. And so has the value of truth. In such a scenario, we ask how easy is it to speak the truth? And is it not ev-erybodys responsibility to foster an environment where it can be spo-ken and heard fearlessly?

    shalini s. Dagar

    99n o v e m b e r - d e c e m b e r 2 0 1 3 C F O i n d i a

    cover story

  • It is my job to tell you the truth, Sam Manekshaw, chief of the Indian army had apparently told then Prime Minister, Indira Gan-dhi, while declining to do her

    bidding in the summer of 1971. Mrs Gandhi, pressurised by the refugee inflows, wanted to go to war immediately over the East Pakistan issue. And he was ready to resign or be fired should she disagree.

    Legend has it that Sam Bahadur, who was later elevated to Field Marshall, got his way and the war happened only towards the end of the year. And India won one of its sweetest war victories of all time. He was succinct in his message to his Prime Minister, It is my job to fight, it is my job to fight to win and I have to tell you the truth.

    Can it ever be part of anybodys job to tell the truth? Sometimes, honesty is almost the precondition to a good job. The stakes may not always be as high in our ordinary lives, but the repercussions can be no less serious. Lose the battle and the war and the consequence is clear in terms of lost strategic advantage. Win it, create a new country and quell the enemy for a long time. The losses and the gains can persist for a long time.

    Our primary community of CFOs, with the new Companies Act, 2013, is at the centre of the governance framework in Indian business. Increasingly, the CFOs job is one such which requires telling the truth constantly and relent-lesslykeeping the company and its leadership on the straight and narrow path.

    Against this backdrop, it is then impera-tive that the CFOs voice is not muffled. Yet, it cannot be the only voice speaking the truth. Broadly, across the social spectrum truthspeak should be possible with ease.

    In recent times, when Indian politics as well as business has been hit by a scam a season, it is worthwhile to explore what it takes to speak the truth and why it matters. After all, when the emperor went out naked there was a conspiracy of silence by all the adults (the possible truth speakers) which accompanied him. For every loss of direction at the leadership level, there is gagging of many voices in the leaders vicinity.

    For our anniversary issue this year, we chose to look at the broader theme of what happens when the truth is actually spoken. What are the repercussions? We elicited a great deal of inter-est. Many people promised to think through and contribute to the issue. Some declined with little thought, others did so with a little more thought. And it was not because they did not wish to contribute. It was merely that such interactions require deep conversations with ones own self. And time is at such a premium that these conversations inevitably get post-poned. Or, in other cases, it would have meant creating unnecessary strife within the existing or past professional relationships. Often the biggest stories are the ones that are untold.

    However, we got tremendous encouragement from all people we contacted for this issue. And we are grateful for the the generosity with which they shared their thoughts with us.

    A brief encapsulation of our efforts follows with with multiple anecdotes, big and small, of the circumstances of truthspeak, why it was important and the ensuing repurcussions. Each of us lives and acts on our version of the truth. Then what is the truth and what should prevail? Based on our tough but extremely sat-isfying experience of asking leaders in diferent walks of life, we figured truth is the one version which once having shared with the relevant peo-ple we are at peace with ourself, if not the world.

    The consequences are not always pretty as

    When the emperor went out naked, a conspiracy of silence by all truth speakers accompanied him.

    Anniversary Specialthe truth

    1010 C F O i n d i a n o v e m b e r - d e c e m b e r 2 0 1 3

  • can be seen from the accounts that follow. Often the person who raises an uncomfortable issue is considered a naysayer or somebody who blocks productive action. In extreme cases, personal attacks and villification may follow.

    Yet, equally there are quite a few instances where there are no negative consequences. Rather, the end result is pleasant. Perhaps, we overestimate the impact of truthspeak too much. Maybe we are too timid, and too often.

    Manner MattersFor CFOs, truthspeak often revolves around keeping the business side grounded. As busi-ness cycles go shorter, competition gets more intense, the propensity to take quick and short cuts gets higher. The CFO is the voice of sanity in such cases.

    Equally in the real grime of every day opera-tions, the CFO needs to figure out when to stop. Is it enough to take the truth to the top management in some cases or in others to take it beyond to the board or the audit com-mittees? What is the appropriate quantum or standard of truth that requires a certain level of response?

    Most of it boils down to the circumstances that surround truthspeak. Corporate veterans

    add that the manner of speaking the truth is crucial for it to be effective and to have a desired impact. Sometimes truth gets rejected for being spoken too brusquely.

    When I think back, I find that the ability of people to speak their minds, is both a function of their own courage, and the receptiveness of the person being spoken to and the environ-ment in which these discussions happen, says Neeta Revankar, CFO, Sasken Communica-tion Technologies. Much of that stems from organisational culturethe degree of accept-ability of conflicting opinions. The tone set at the top and all the actions taken by the top management set the values and culture of the organisation, says Nand Gangwani, CFO, Eval-ueserve rather succinctly.

    Yet, there are circumstances where the truth is neither heard nor indeed spoken. Yet what is clear is that there is a great reason to continue to speak the truth more frequently.

    Speaking the truth changes the manner in which decisions are taken. It flags a moment of reflection, and in retrospect it offers a chance to course correct earlier than other-wise. And in other cases, it could well offer a chance at lifetime glory like in the case of Field Marshall Sam Manekshaw.

    What makes it easy to speak and

    hear the truth in organisations is

    the tone at the top.

    Nand Gangwani, CFO, Evalueserve

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    1111n o v e m b e r - d e c e m b e r 2 0 1 3 C F O i n d i a

  • India is not an easy place to do business. Or to speak the truth. Its not the explicit rules and regulations that deter businessmen. It is the myriad unspoken rules. shalini s. Dagar

    This southern state comprises 20 per cent of the Indian market in our category. Every six months I go to the drawing board and look at what we should be doing there, says the CFO of a fast moving consumer goods business as he sits in

    the coffee shop of a metropolitan hotel. It is early morning and the coffee shop is full of the smell of, well, the smell of coffee and breakfast. Numer-ous foreigners sit at various tables, hoping to make money from the often confusing and chaotic country that India is.

    This CFO continues, In this state, the operating environment is so loaded against us that there is no way we can do business here and remain compli-

    1212 C F O i n d i a n o v e m b e r - d e c e m b e r 2 0 1 3

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  • ant with the Foreign Corrupt Practices Act and the UK Bribery Act. The main operators there are politically affiliated and we just cannot compete with them on a level turf. Though this state mar-ket is tempting, yet from an overall compliance and reputation perspective, it is just easier to stay away. Many foreign companies are similarly find-ing it easy to stay away. And Indian companies who operate across the globe are similarly finding it difficult to adhere to these uniquely Indian rules of engagement. Corruption in India is endemic. In China, even if you need to make a payment, there is a single point of negotiation. Once it is done, work proceeds smoothly. In India, the nego-tiation is pretty much at every level of the system and quite independently of the other levels.

    This is not an isolated gripe. A head of a private equity firm which has been eyeing the education sector in India for close to a decade shares some more angst. The firm has not found the route to invest in this booming sector because of the manner in which there is a web of vested interests which militate against a fair and level playing field. And despite the opportunities they steered clear of real estate for a very long time.

    Sitting in his office overlooking a mushroom-ing city of skyscrapers, he had said some years ago, yes, we are interested in the sector. How-ever, there is no way we are going to get into this mess. No surprise then that India ranks a low 134 out of 189 economies in the ease of doing business according to the World Banks 2014 Doing Business report. In fact, there has been a slippage in the overall rank from 131 last year. (See Doing Business 2014). The big issues remain approvals and enforcement of contracts.

    Cost of honestyIs the cost of honesty in India only missed oppor-tunities? A CFO from an IT company based in Bangalore is more candid. There is a direct bot-tomline impact, in terms of additional money that you need to pay or the time it takes to get relevant approvals. How long can you remain competitive versus competitors who are not as straight?

    This CFO points out how in India, they had a six year wait after a land allotment before they could begin construction. And in US, our approval for an office came in May and we started billing for 40 people from that site in December. Where do you think my incremental investments will go, all other things being equal? And they are not equal.

    The CFO of another Indian company who is based overseas shudders about possiblities earlier before the company aimed to get listed overseas. He recounts an incident where there was an anonymous whistleblower who called up against the transport department. I called in the team immediately, but the transport head took the phone and started threatening the person on the other side. There were no more phone calls after that. Given our controls, I know nothing major is possible now, but sometimes I wonder?

    In fact, in IT companies, according to another CFO, it was always easy to show inflated expenses via the transport and cafeteria expenses. The Satyam fraud at a much larger level highlighted many of these practices as Raju rode his tiger into the sunset. Real estate is another sector which is often associated with dodgy practices. The former CFO of a storied real estate company says, it is not a business at all. This sector is just a collec-tion of brokers. He recounts a time, when soon after joining the company, he went up to the owners to ask about loans outstanding to several firms. In tough times, these were good to call. The promoter, however, just shrugged off the query. Leave them as it is, was the instruction. On further exploration it was found that these were not loans at all, but cheque payments in lieu of cash. The CFO, of course, did not stay around for too long to discover what happened to these loans. Write-downs would be a way out. The opac-ity that accompanies the real estate sector prices

    The operating environment is so loaded against us that there is no way we can do business in this state and remain compliant. The market is tempting but it is easy to stay away.

    1414 C F O i n d i a n o v e m b e r - d e c e m b e r 2 0 1 3

    Anniversary Specialthe truth

  • is another way in which many Indian companies legitimise grey transactions.

    Noted economist and professor, NIPFP, Ajay Shah believes there is a churn in the quality of companies. His logic is that the old businesses were focused on cash flows and not valuations. In the last decade, the game of valuation yielded obscene returns and therefore, businesses found it easier to gravitate towards it. Corporate DNA changed with the most rotten businesses and politicians rising to the top under such Darwin-ian conditions. This led to a quasi-government enterpreneur who fixed the political system to get sweetheart deals and therefore engineered fantas-tic valuations. And new and sudden wealth.

    The head of the PE firm explains how such transactions typically occur even in a completely new sector with new entry norms. Say suppose, you are the first firm to apply for entry into a sec-tor and all your papers are in order. You would expect you would get the approvals quickly. You keep seeking updates. However, after sometime you are approached by a firm which wants to be bought out at a premium. This firm has all the relevant approvals and when you explore a little further you find it is owned by the friends or rela-tives of the political and bureaucratic powers that be. A typical case of a fortune being made via regulatory arbitrage. Companies which are not squeamish about the process, buy out the firm and get on with the business.

    A CFO of another multi-national says, our rule is simple. Work never stops. We do whatever is needed to grow the business. If we have to pay

    speed money, so be it. Of course, this company or its CFO would never admit to such transac-tions in public. And of course, they would route such facilitation work through outside agencies thereby being fully compliant with the letter of the domestic and international law. That, unfor-tunately is the ugly underbelly of the fantastic growth opportunity in India. Compliance in letter, and not in spirit. This toxic nexus of power, poli-tics and money is at the heart of what ails India.

    What works in recent times is that the media scrutiny is much more incisive and sustained. And regulatory and enforcement action when it takes place is often crushing for the errant com-panies and their top management. According to Shah, India is still a medium grade enforce-ment countryyou do not always get punished for wrong. He also believes that both capital and labour are now choosing better governed compa-nies which will over time lead to a natural win-nowing out of the worst.

    Most developed countries have gone through this process of churn. In Indias case, we just hope there is the sweet reward of strong and resilient institutions at the end of the churn. Another hope is outside pressure as India globalises. The CFO of the FMCG company in the coffee shop says they are exploring options whether pressure could be brought to bear on local authorities through the World Trade Organisation for anti-competitive policies.

    It may be unpalatable, but it is inevitable if we do not reset our own rules in time.

    Topics DB 2014 Rank DB 2013 Rank Change in Rank

    Starting a Business 179 177 -2

    Dealing with Construction Permits 182 183 1

    Getting Electricity 111 110 -1

    Registering Property 92 91 -1

    Getting Credit 28 24 -4

    Protecting Investors 34 32 -2

    Paying Taxes 158 159 1

    Trading Across Borders 132 129 -3

    Enforcing Contracts 186 186 No change

    Resolving Insolvency 121 119 -2

    Doing Business 2014

    Souce: World Bank.

    1616 C F O i n d i a n o v e m b e r - d e c e m b e r 2 0 1 3

    Anniversary Specialthe truth

  • Why do people lie? Why are some people more willing than others to speak the truth? According to Transparency

    Internationals 2012 Corruption Perception Index, India was placed 94 versus Singapores fifth position in a ranking of the least corrupt nations. Is India a corrupt nation? Are there no corrupt individuals in Singapore, a country known for its squeaky-clean image? These are important questions.

    Amit Bubna, Professor, ISB explores truth and its cost as a framework. Is regulation the only way to spur more truthspeak?

    Some facts: We know people lie. Surpris-ing though it may be to some, there are many honest individuals in India. And indeed, many in Singapore do lie. We also know the same individual is capable of lying some times and of being honest at other times. So clearly, indi-viduals have a choice, and they must decide what to choose. This brings us to the decision-making process.

    How do people decide whether to lie or not? I would argue that this decision is similar to any

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  • other decision, and is not very different from the process involving the choice between a pink and a blue shirt.

    We live in a world of choices, more so today than ever before - which restaurant to go to, which house to buy, which school to send our child to, and so on. We therefore are required to make decisions at every juncture. Decisions reflect an individuals preferences, constraints and strategic considerations. Lets talk about each of these.

    KEY DECISION DRIVERSOur preferences determine how we tradeoff one activity over another. As we know, there are cricket fanatics who, no matter what their choices, will never choose any other sport over cricket. Lexicographic preferences describe

    such individuals. In reality, most individuals preferences allow for some tradeoff. While I like fruits, I am willing to give up some fruits in exchange for a vacation, both of which give me some pleasure. And how many fruits I am willing to give up also depends on preferences. Someone who loves fruits more passionately than another would be willing to give up fewer fruits for the vacation.

    Many facets of our preferences may be intrin-sic to us, determined by our genetic makeup per-haps. For instance, we may be hardwired to like certain colors (blue is for boys, pink for girls?). But preferences may be dynamic as well. They

    could evolve, based on factors such as experi-ences, stage of life, fads, etc. While I intrinsically prefer pink, my proclivity for experiencing peer pressure as a teenager may alter my preference and lead me to wear a blue shirt instead.

    We also work under constraints. Even if I prefer a pink shirt when I am unconstrained, I may buy a blue shirt instead if pink shirts are particularly expensive and if I need to stay within my monthly budget. Finally, strategic considerations influence our choices. It is possible that my choice would depend on the actions of another person. Suppose that the price of pink shirts goes up when another per-son buys a pink shirt. In this case, the other persons choice of shirts will determine the shirt I would buy.

    Strategic considerations

    influence our choices. My choice

    could depend on the actions of another.

    Amit Bubna Professor, Indian School of Business

    TRUE COSTThis simple framework applies equally well to the decision about truth-telling, or for that mat-ter, any decision about whether to do the right thing or not. We could simply replace the pref-erence for and choice between pink and blue shirts, with a choice between truth-telling and shirts. Given that there are no absolute truths, we could consider preference over the degree of truth-telling instead of the number of pink shirts. We could reasonably believe that people generally like being truthful, and also that the sense of pride or satisfaction from being hon-est the first time around is significantly higher

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  • than the fifth time one is honest. Given these assumptions, peoples preferences would sug-gest a tradeoff between shirts and truth-telling (if these are hypothetically the only 2 prod-ucts). In other words, I would be willing to give up fewer and fewer shirts for an additional opportunity to be honest.

    What about constraints? If honesty was costless, there would be no reason for anyone to lie. It would be more reasonable that in most cases, honesty comes with a cost, just like buying a shirt. For instance, being hon-est about poor performance may lower pay, effectively imposing a greater constraint on the person. Under these conditions, standard economic theory suggests that the individual would balance the extra (or marginal) benefit from being truthful with the extra cost of such an action, which would determine the degree of truthfulness. (See Truth Framework)

    So how do some of the implications of this simple model apply to reality? One could argue that a policy of dont ask, dont tell is effec-tively one of intermediate truthfulness. This is not to suggest that we would never find an indi-vidual who always speaks the truth. Its a mat-ter of preferences. Persons with a lexicographic preference for truth would optimally choose to be truthful under all circumstances. However, if a person lies, one cannot conclude that she only prefers dishonesty. It is possible that she has the same preference structure as another person who is honest, but their constraints may be different.

    There are other potential implications. We often see relationships dictating whether a per-son is honest or not. One may be more likely to be honest when speaking with a less important person. This is equivalent to there being less at stake, i.e., in the language of the model, the constraint is not as tight.

    REGULATIONS FOR TRUTH? The model is not meant to glorify an indi-viduals decision to lie, but should be considered as an attempt to merely better understand human behaviour of which lying is an intrinsic and common component. But it is important to ask why we should be concerned about an individuals propensity to lie or the absence of truth-telling in a country. Going back to our shirt analogy, a persons choice of pink over blue shirt should not be of concern to another

    person, except if there are externalities that cannot be corrected through markets. If a pink shirt blinds a person, then there is cause for worry if people choose pink shirts. Even here, a solution would be for one person to pay the other to not wear a pink shirt. Similarly, we do not mandate that people bathe everyday, no mat-ter how repulsive they may appear to some. But if such poor hygiene could cause an epidemic, there is room of regulation. Truth-telling, or the lack thereof, may impose externalities on oth-ers. A CFO hiding a firms poor performance adversely affects shareholders. If the sharehold-ers cannot coordinate amongst themselves to appropriately incentivise the CFO to speak the truth, then there may be a role for regulations. The burden of many dishonest CFOs may keep retail investors out of the capital market com-pletely, thereby affecting the very viability of the market. In such cases, there is an even stronger case for regulation. Stringent disclosure requirements, indepen-dent directors and other such closer monitoring mechanisms that regulators have put in place must be seen as outcomes of this thought-process. Nonetheless, it is difficult and costly to change human behaviour. Therefore, it is hard to justify attempts to change every action that we may agree to be immoral, except if there are sound rational arguments that cleanly identify the channels and consequences of those immoral deci-sions. Truth-telling is one such matter.

    Truthfulness

    MR

    MC

    MR, MC

    The Truth Framework

    MR = Marginal Revenue MC= Marginal Cost

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  • Vinod RaiFormer Comptroller and Auditor General of India

    Education Masters in Economics from Delhi

    University, Masters in Public Administration

    from Harvard University

    agE65

    Prior rolEsSecretary, Financial Services,

    Ministry of Finance, Prinicipal Secretary, Kerala I

    wish to share my experience on an issue, which I had to confront, and which is very much in public domain now. The purpose of sharing it with the CFO community is to project a better appre-ciation for the need for transparency in all dealings .The idea is to demonstrate that when procedures, systems and accountability

    are given the go by, complications arise, which create much greater damage to the system and the interests of the parties involved in the decision making process. I am drawing attention to the avoidable con-troversy created in the allotment of coal blocks for captive mining by power generation companies.

    Not having an Achilles heel can enhance ones courage.

    Anniversary Specialthe truth

  • was used as a basis for a decision. The minutes did not indicate how each one of the applicants for a particular block was evaluated. All that the minutes indicated were the details of the applicants and the decision of the committee. There was, thus, no trans-parecy in the decision making process.

    It was also simultaneously noticed that in July 2004 itself, the then Secretary of the Ministry had recorded that due to a substantial difference in the price of coal supplied by CIL and captive mining a windfall gain (exactly his words) was accruing to the captive mine allottees. He recommended that the allocation system be changed to ensure competitive bidding and trans-parency. This proposal was accepted in principle and the Secretary was directed to bring it to the Cabinet.

    All this was fine from an audit perspective. Prob-lems arose when despite the Prime Minister nod, the Mines and Minerals (Development and Regulation) Act (MMDR) was amended only in July 2010 after Parliament approval. This despite the Law Ministry indicating in July 2006 that administrative instruc-tions were sufficient to introduce competitive bid-ding because even the screening committee process was introduced through similar instructions. Audit was, hence, concerned with the following:

    1. Minutes of the Screening Committee did not indicate the decision making rationale.

    2. The decision to change the procedure for allot-ment was deferred till amendment to the Act was passed and notified in 2010. This despite the fact that

    lookIng backThe issue was not easy to resolve. I had to decide within the mandate bestowed on me. The dilemma before me was huge. Should we put these facts in public domain? There was none I could consult.

    BacKgroundLet us acknowledge that the decision taken by gov-ernment to ensure power to all by 2012 was indeed a very appropriate and well thought out one. It was recognised that in order to encourage private promot-ers to invest in power projects it would be essential to assure fuel linkage for these plants. It is also a fact that coal is the most easily available and reliable domestic raw material for power generation. More than half the current commercial energy require-ment is met by coal. However, Planning Commis-sion estimates pointed to the widening gap between demand and supply of indigenous coal. It was expected to be more than 70 million metric tonnes by 2010-2011. This necessitated expensive imports. In this broad context, captive coal mining was envisaged as a mechanism to encourage private sec-tor participation in coal mining. It was perceived that Coal India Ltd (CIL) would be constrained to enhance production to meet this expected demand. The issue then was how to ensure private operators got access to these sources of coal as under the Coal Mines (Nationalisation) Act 1973 coal mining was the exclu-sive preserve of the CIL. The enabling amendment was enacted in 1993 to allow coal mining for captive coal extraction for power generation. Yet, till 1993 there were no specific criteria for allocation of coal blocks which were done based on letters of recommendation from the con-cerned state governments. From 1993 onwards, the allocation of coal blocks was done by the Ministry of Coal (MoC), based on the recommendations of an inter ministerial commit-tee, comprising officials from the central and state governments and the CIL. In view of the increased demand for coal in the Xth plan, the number of appli-cants for coal increased very substantially. There was also very significant volatality in international prices of coal. This was the position in 2004.

    The Comptroller and Auditor General does routine audit of govt departments in rotation. During my tenure, a similar audit was proposed and undertaken for the MoC. In the course of audit, this procedure of allocation of coal blocks based on the recom-mendation of the Screening Committee (SC) came under focus. It was noted that the Committee recom-mended allocation of blocks out of all the applicants for that particular coal block to some applicants. This was done via its recommendation contained in the committees minutes. On closer perusal, however, it was found that there was nothing on record in the minutes or in other documents on any comparative evaluation of the merits of each application, which Ima

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  • parliamentary amendment was not needed.3. Audit found that in a meeting held in the PMO

    in July 2005, it was decided that the screening com-mittee procedure would continue till the new proce-dure became functional after amendment to the Act.

    4. Against this backdrop, it was observed that as of June 2004, 39 coal blocks had been allotted. However, from July 2004 to September 2006, when the Law Ministrys advice was available with the MoC, 71 more blocks were allotted. Clearly, there were was a spurt in applications which necessitated a spurt of allocation via the existing procedure. There seemed to be a desire among applicants to get mine blocks before the procedure underwent a change.

    5. Audit also found in February 2012 that of these private allottees only one mine had actually been operationalised in the interim.

    tHE trutH or unPlEasant FactThese audit findings were shared with me in March 2012. The team felt that not auctioning the coal blocks among the private applicants had deprived the national exchequer of substantial revenue. This surmise was strengthened since the allottees seemed to be merely squatting on the mine allotments. The team felt that the correct decision had been taken in November 2004 itself but the MoC had procrasti-nated. The issue before me was whether this audit finding should appear in the report which would be placed before parliament and therefore in public. The decision was sensitive as during this period for about 3-1/2 years the Prime Minister himself was

    holding the coal portfolio and all decisions or delays could be traced to his secretariat. The dilemma before me was huge. Should we put these facts in public domain? They had the potential to create a great deal of controversy which would hurt the government and may even impair the image of the P.M. I had to take a decision. There was no one I could consult. I had to decide within the mandate bestowed on me. Person-alities could not be allowed to colour my judgement. There was a certain commitment I was bound to by oath. I was also conscious that irrespective of what decision I took, much churning would take place. There would be a major cascading effect of the deci-sion on administration and parliament. On the other side, the credibility of the institution of CAG would be severely eroded if audit faltered in its track and shied away from documenting its findings.

    I decided after due deliberation that the truth in terms of the facts emerging had to be told. We and in particular, I was duty bound to do so. We did just that. We put out the audit findings in our report. The rest is now common knowledge. The repercussions of this report were along expected lines. Ire was directed towards the office of the CAG. It degener-ated into personal attacks too. I must accept that I had never anticipated the ferocity of those personal attacks though there were a couple of similar epi-sodes in connection with reports released earlier.

    Much has happened since the report was made public in Aug 2012. The fundamental benefit deriv-ing from this clinical narration of events is that cor-rectional procedures have been put into operation. Going forward, government decisions will be more transparent and procedures will hold people account-able for their decisions. I am convinced that it will not stymie decision making, where genuine desire to take decisions exists, as all decisions taken in good faith and in an environment of objectivity, leave no scope for adverse observation.

    In retrospect, one has to ensure that such a deci-sion will withstand scrutiny by the public or con-cerned agencies. It is imperative that extraneous considerations do not colour such critical decisions. I feel that persons placed in similar situations should not shy away from speaking the truth. The high stakes in revealing the truth far outweigh any other consideration. This need to reveal the truth should never be sacrificed at the altar of any contrived or convoluted logic of self preservation. Apart from the courage of conviction one should ensure that facts have been accurately marshalled and presented. Not having an Achilles heel in oneself can enhance ones courage to speak the truth multi fold.

    Going forward, government decisions will be more transparent. I am convinced decision making will not be stymied.

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  • Samir K BaruaProfessor and

    Former Director, IIMA

    Education Mechanical engineering, VNIT

    Nagpur; MTech, IIT Kanpur; Doctorate in Business Management,

    IIM Ahmedabad.

    agE62

    Prior rolEsCrompton Greaves as an industrial engineer; part of the IIM-A faculty

    since 1980 Talk of truth always brings up the story of Raja Harish-chandra who never lied. On being tested by rishis and gods, he gave away his kingdom, sold his wife, son and himself into servitude to uphold his commitment to truth and honesty. In more modern era too, we do come across

    instances of several individuals who showed exemplary commitment to truth. Mahatma Gandhis autobiography The Story of My Experi-ments with Truth narrates numerous instances where he remained truthful despite negative consequences of his confessions. Gandhi also mentions how he had been inspired by Raja Harishchandra. I do not

    Waiting forGodot..

    Anniversary Specialthe truth

  • One of the key responsibilities of the board and in particular that of the non-executive independent direc-tors (NIDs) on the board, is to protect the interests of the minority shareholders. In the Indian context, where most companies have well identified pro-moter (dominant) shareholders, this often requires putting restraint on the promoter shareholders from taking decisions that are detrimental to the inter-ests of the minority shareholders. In case of PSUs, it is not unusual for the government (the promoter shareholder) to impose decisions on the compa-nies (arguably for the larger good) that may some-times severely compromise their financial viability.

    In my long association with boards, there have been several occasions when I have had to take a principled stand against the excesses sought to be perpetrated by the dominant shareholders. One epi-sode that stands out is the one that occurred when I was on the board of Coal India Limited (CIL).

    The issue pertained to CIL signing Fuel Supply Agreements (FSAs) with power producing com-panies for supply of coal. Power producers in the private sector are companies owned by powerful industrialists. They had successfully lobbied with the government to coerce CIL into signing FSAs that were not equitable. There was no way CIL could have met the targets for supply that were proposed in the FSAs. The penalties sought to be imposed

    LooKing BacKIn case of public sector units, it is not unusual for the government as promoter shareholder to impose decisions on the companies (arguably for larger good) that may severely compromise their financial viability.

    know whether the generations growing up today read these stories and whether the protagonists in the sto-ries inspire them as they did the earlier generations.

    As is appropriate for a democracy, we have to at least pretend that we are concerned about the increase in dis-honesty and cheating in the society. The measures that have been put in place over the last decade to deal with this menace include several that attempt to improve the probity of functioning of business organisations.

    The key measures for listed companies are enshrined in the provisions contained in Clause 49 of the listing agreement that the companies sign with the stock exchanges. Most of these measures have now acquired legal sanctity by being made a part of the new Companies Act.

    Central to the measures is the requirement for the boards of listed companies to have a sizeable proportion of non-executive independent directors (NIDs) who are charged with the responsibility of improving the quality of governance of these compa-nies. Constitution of several board sub-committees and specification of their role and manner of func-tioning are also expected to enhance governance of companies. Have these measures been effective in actually improving governance and ensuring that truth prevails in their manner of functioning?

    I shall attempt to answer the question posed based on my personal experience of being on the boards of over 20 companies over the last two decades. I have closely interacted with and observed about 100 CEOs and several hundred board members during this period. More often than not, the measures for improv-ing corporate governance are regarded by promoters and executive management of companies as require-ments to be complied with rather than as an oppor-tunity for enhancing probity of functioning. It is not uncommon for executive management to manipulate information provided to the board and manoeuvre board processes to avoid uncomfortable queries on decisions and functioning. NIDs on their part have been dishonest by not fulfilling the responsibility they are entrusted with. It is not uncommon for them to be inadequately prepared for discussion on board agendas. They are also often guilty of shying away from expressing their views honestly if their views are known to be contrary to the views of the promoters. Their continuance on the board is often contingent on their being pliant with the wishes of the promoters.

    Overall, what would be my verdict on the quality of corporate governance as a result of these efforts? Yes, there is improvement; but far less than what would be a legitimate expectation. Would Satyam never happen again? No, that cannot be guaranteed. Ima

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  • in case of shortfall in supply meant that from day one of the agreement being signed, CIL would have to pay huge penalties to the power producers.

    The CIL board at that time was being chaired by a senior civil servant from the coal ministry. Being in the government, the person had no option but to push the agenda of signing the FSAs. As hap-pens in such situations, the functional directors on the CIL board refrained from taking a stand against the wishes of the government despite know-ing that it would be detrimental to CIL. More often than not, the NIDs too become just nodding heads!

    On this occasion however, on suggestion from a few independent members, all the NIDs met sepa-rately to discuss the stand they should take. In the meeting, a few of us pointed out that in addition to risking our reputation and image, agreeing to the bla-tantly one-sided proposal that was against the inter-est of CIL, we could face serious penal action by the regulators and the courts. After considerable delib-erations, it was decided that the NIDs as a group would record their dissent in writing with reasons for opposing the proposal. The board could still go ahead with the proposal and approve signing of FSAs. The decision though would then be a majority deci-sion and not a unanimous decision of the board.

    The government balked at using board majority to force CIL to sign the FSAs. Instead, the government chose to use a provision in the Articles of Associa-tion (AoA) of CIL. This provision contained in the AoA of all PSUs (and often overlooked by investors) permits issue of directive by the President of India

    to a PSU to take a certain course of action. As speci-fied in the provision, such a directive may be issued only if a calamitous situation is faced by the nation. It was clearly debatable whether the signing of FSAs warranted use of this provision. A presidential direc-tive, however was issued to the board of CIL ask-ing it to ensure that CIL signed the FSAs with the power producing companies within a specified date.

    The government however was circumspect while issuing the directive. Perhaps to be able to deflect the responsibility to the CIL board, should the matter become contentious, the presiden-tial directive also asked the board to protect CILs commercial interests while signing the FSAs.

    The board chair sought the boards approval arguing that in view of the presidential directive, the board had no choice but to approve signing of FSAs. The NIDs argued that while the first part of the directive was unambiguous, the qualification that board should protect the commercial interests of CIL queered the pitch for the board. If the FSAs were signed as proposed, the board would be guilty of not having protected the interests of CIL. The government had (not so cleverly) ensured that board and not the government would be held squarely responsible for signing of one-sided FSAs by CIL.

    The NIDs suggested that a fresh, unambiguously worded presidential directive should be issued so that the decision was entirely outside the purview of the board. The impasse continued for several months and over several board meetings. The gov-ernment was unwilling to issue a modified, clearly worded presidential directive and the NIDs were unwilling to let CIL sign the FSAs as proposed.

    Finally, to break the dead-lock NIDs took the ini-tiative of redrafting the unacceptable portions of the proposal including the one-sided penalty clauses in case of under-supply. The modifications to the FSA were opposed by the power producing com-panies, with a large PSU in the power sector lead-ing the opposition. After protracted negotiations involving the coal ministry, the power ministry and other arms of the government, lasting over sev-eral months, revamped FSAs were finally signed between CIL and the power producing companies.

    The outcome of the episode was a victory for gover-nance. The dominant shareholder was made to realise that there were limits to the power that could be exer-cised on the board. The NIDs played a constructive role by ensuring that the board functioned on principles of good governance. Such episodes ought to proliferate across boards of companies. Only then would the integ-rity of governance of corporations be enhanced.

    The dominant shareholder was made to realise that there were limits to the power that could be exercised on the board.

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  • N Santosh HegdeFormer Supreme Court

    Judge and Lokayukta of Karnataka

    Education Central College, Bangalore

    (B.Sc); Government Law College, Bangalore.

    agE73

    Prior rolEsChairperson- Telecom Disputes Settlement Appellate Tribunal;

    Solicitor General of India; Advocate General T

    ransparency and accountability are two factors which are built into good governance. The truth here is absolutely necessary. You cannot offer good governance, good man-agement and good service to the people unless it is based on facts. Facts mean the reality, the truth. You cant imag-

    ine a different factual situation and build good governance. I think you must first realise what the requirement of the situation is and how it will be met. That means you must know the reality, which is the truth. Reality is not something which is different from the existing facts. I headed the institution of the Lokayukta (Ombudsman) in Karnataka.

    Truth is anabsolute necessity

    in public life

    Anniversary Specialthe truth

  • We hear some people speaking on election plat-forms and their words have no semblance of truth in them. But, they think they can impress the audience. I dont think you can do that.

    Take one example of my investigation into illegal mining in Karnataka. I indicted three former chief ministers and nine ministers of Karnataka govern-ments, past and current, of involvement in the illegal mining. I also indicted 797 officers starting from the IAS and IPS to the Forest Service, Karnataka Admin-istrative Service and various other offices. I believe that my enquiry led to a conclusion which is the truth. The illegal mining mafia was prospering with political patronage.

    Many of those who were indicted were powerful people and they didnt like it. Chief ministers are very powerful people and they wait to strike back at you. Let me give you an instance. The former Karnataka chief minister H. D. Kumaraswamy invited me to join as the Lokayukta when I was the chairperson of TDSAT in Delhi in 2009. I am from Karnataka, I wanted to go back.

    During the course of my investigation into illegal mining, I found Kumaraawamys involvement at some point of time and named him in my report. One day, he made a statement that my night life should be investigated. And this from a man who married a young woman in his second marriage. At that time, I was with Team Anna and was participat-ing in a protest against at Freedom Park in Banga-

    lookiNg backI named the former chief minister who had invited me as Lokayukta as one of the accused in the report in illegal mining. Later when I was participating in the anti-corruption protests as part of Team Anna, this politician said that my night life should be investigated.

    The object of the Lokayukta Act was to oversee good governance including prevention of corruption, nepotism and arbitrariness in administration. These were the objectives of the institution. I had to speak nothing but the truth. If I have to tell somebody my opinion or my assessment, it has to be something that I believe to be true. I cannot just make an accu-sation because it fits my objectives. Now, when a government does not render good governance, I must point out that you are not delivering good gov-ernance, therefore you have no right to be there and if you cant deliver good governance you will have to quit that post and go. Or if someone has made a wrong judgment that has led to some criminal result, then he has to be punished. Therefore, irrespective of the status or his affiliation to me, I must speak the truth which I believe to be true and then expose it. Thats the kind of truth I am talking about which I inculcated in my world when I was an Ombudsman.

    One cant have one set of facts for somebody who is close to you and another for others under similar circumstances. This equal application of facts hurts many people many times and you make enemies in the process. There are many people whom I have indicted and who today are turning around and mak-ing accusations about me. But it is difficult for them because my life has been an open book to everybody. I do not hide anything; I do not lead a dual life.

    I am not saying that I am a totally honest person. In my previous duties, as a law officer or as a practic-ing lawyer, we had to twist many things to suit the occasion or show them in a different colour alto-gether. However, when I was the Lokayukta, I owed an obligation to that post to expose what is illegal. Exposing malgovernance and other shortcomings of various public departments and exposing people responsible for scams and tragedies was part of the job of the Lokayukta. So, in the process, you make an inquiry and if you are convinced of the facts, you have to expose the person behind it. That particular individual, or at least 99 per cent of the same kind, were sure to become my enemies. However, I have not been scared of the consequences.

    Here, in the discharge of my duties as the Loka-yukta, I have based all my decisions on facts which I believe to be true. I may be wrong; I might have com-mitted human errors. And if I have realised it, then I have retracted and said sorry. Therefore, truth is an absolute necessity in public life. In other areas, peo-ple might not find it to be that important, but not in governance. You cant paint a picture just to remain in office - on that chair - which is exactly what is hap-pening in a big way in the present day system.Ima

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  • lore. I said yes, my night life should be investigated. I come from one place and go back at night to the same place where there is my wife for 44 years. I have only one wife and I have only one house. This hurt him very much.

    Let me share another incident. During my investi-gations into the illegal mining networks I was being assisted by a dozen government officers from differ-ent departments whom I had drafted into my team.

    One officer, Deputy Conservator of Forests, R. Gokul, who was working in a district called Dharvad in Karnataka detected that about 5 lakh metric tonnes of iron-ore had gone missing from the amount seized by the Lokayukta police. This seized amount was stored in the Belekeri port.

    Gokul reported this development to me. I asked him to file a police complaint for theft against whom-soever he felt was responsible. I would then investi-gate the case. One day when this officer visits Dhara-vad he is approached by the people responsible for this theft. Something transpires and the next thing we know is that the official was ordered to be placed under suspension by the state minister for Ports J. Krishna Palemar.

    When I came to know of the suspension, I felt that if I cannot protect this officer, how can I continue in this post? I went straight to the Governor and told him that I cannot function as the Lokayukta and can-not complete the inquiry if officers assisting me are harassed. This stance of mine led to a big turmoil in Karnataka. The stalemate continued for about 10

    days and eventually the officer was reinstated and continued thereafter as part of my investigation team. I too withdrew my resignation. Had I not done so, I would never have been able to complete my report, and a major fraud in mining would never have come to the public domain.

    Often, I have been told that the mining industry has suffered after I submitted my report. Recently, when this argument was put to me, I got into a spat with the Goa chief minister. I told him that if the mess would have been contained right at the begin-ning, subsequent events would not have happened.

    I believe you need to view the scenario from a dif-ferent point of view. Illegal mining in Karnataka is not a minor evil. One metric tonne (MT) of iron ore of 64 Fe quality that cost around Rs. 7,000 to Rs. 8,000 was being sold for a few hundred rupees by the government. This was a property that belonged to the state which was being given to the private parties at virtually throwaway prices. In the process, statutory rules and regulations were ignored. We have rules which define where you can mine, how much you can mine at a time etc. However, all the existing envi-ronmental norms were ignored for greed.

    You cut mountains, you cut forests and you make roads into forest. The entire flora and fauna is destroyed. You create an illegal empire that is thriving at the cost of the state economy, but when someone tries to demolish that empire, you say that the empire was feeding lakhs of people, creating job opportunities. Is that a valid defence? Or put another way, we should have wars because it employs several thousands of people.

    There is a small place called Sandur in Bellary district where at one point of time, 15,000 vehicles plied daily back and forth within 12 hours. Can you imagine the plight of that small town with a single roadopen-bodied vehicles with dust flying all over, no natural water bodies and all houses covered with iron-ore. Add to it unaccounted for road accidents. And you say we shouldnt stop such destruction because their stomachs will be hit. I really dont understand the logic of this. This question was also put to me by Goa chief minister, Manohar Parrikar. I told him that if you strike down Dawood Ibrahims empire, thou-sands of people would go unemployed. But can you allow him to do whatever he wants?

    One needs to distinguish between right and wrong.Through this process, wrong fails and the unjust suf-fer but it also brings relief to many others. For a pub-lic servant, including a prosecutor, the truth must be the foundation for whatever he does, no matter how uncomfortable.

    For a public servant, including a prosecutor, the truth must be the foundation for whatever he does, no matter how uncomfortable.

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  • Congratulations

    We hope to see all our winners there!

    After three months of extensive engagement which involved over 300 nominations, filing up nomination forms, going through jury interviews and attending

    workshops - its finally time to reap the rewards!

    All CFONEXT100 winners will be felicitated and honored at a day long gala event

    at The Lalit, Mumbai on December 17th, 2013.

    Eminent CFOs who were members of the jury, will also be present on the occasion. Apart from the gala

    dinner and felicitation ceremony, the days proceeding will also see interesting panel discussions

    with influential CFOs and domain experts.

    To view the list of CFONEXT100 winners log on towww.cfoinstitute.com/cfonext100

    CFONEXT100, 2013 WINNERS

    Presenting Partner Knowledge Partner

    Congratulation Ad.indd 1 11/29/2013 6:30:20 PM

  • TSR SubramanainFormer Union Cabinet

    Secretary

    Education Masters from Calcutta University;

    Imperial College of Science and Technology, London; Masters in Public Administration - Harvard

    University.

    agE74

    Prior rolEsChief Secretary Uttar Pradesh; Secretary, Ministry of Textiles. I

    n 1997, when I K Gujral was the prime minister, there was a huge current account deficit. When the budget was being prepared. P Chidambaram, the Finance Minister, wanted the retirement age for government servants to go up from 58 to 60 years. The argu-ment was that the average health had gone up and people were

    still quite bright at 58. I believe though that an idiot at 58 will be an idiot at 60; but thats a different thing. Like in every one of these matters, the arguments presented before the public are quite different from the arguments that actually motivate the action. I found Chidambarams logic to be very narrow. Like all finance people who think very narrowly.

    It is Necessary for people to stand up

    Anniversary Specialthe truth

  • senior people and that he wanted it to be issued the same night. I told him that I had just come and didnt have time to examine the list. He insisted, No, I want it done today. He told me that Jitendra Prasad, the then in-charge of Congress party in UP, wanted it done immediately. Prasad had apparently also told the Governor that the PM wants it done.

    All the same, I said that I needed to talk to people and examine the changes that were required. Next day, I went and met him. He gave me that list which had the name of several senior officers including the Home Secretary, DGP, etc. I argued that there was no need since these were all good officers. He sim-ply said, Jitendra Prasad wants it. I told him that I wasnt in agreement and I needed time to study it but he again insisted that he wanted it done that very day.

    Sensing no options, I asked him to add one name at the top TSR Subramanian. Transfer him and I have no problems, I told him. He relented somewhat and gave me 3-4 days to study the list.

    Two days later, I went to Delhi. Narsimha Rao was PM then. I asked for an appointment and he agreed to see me. He asked me about the situation in UP and I told him that the killings had come down and normalcy had been restored. We were managing. After the discussion, I asked him if he had asked Prasad to carry out transfer and postings of some key senior officials. No, I havent asked Prasad to do anything of this sort, he promptly replied. I told him about my conversation with the Governor.

    LookIng back How can you have authority without responsibility? If the politician does these transfers and things go wrong - riots continue - then you and I are responsible. He is working from his party perspective.

    The logic was that if 30 years is the average career span of a government servant, every year about 4 per cent government employees retire, and they get lump sum provident fund (PF) which equalled about one or two years of salary. Broadly, increas-ing retirement age would keep 15 per cent of the government servants income in the government coffers. The argument against this proposal was that for every good man in Delhi, there are 25 rotten fellows who are sitting in states a heavy baggage on the exchequer. So, for getting one good man, the central government is going to pay 25 people for two more years. Secondly, the moment you give two years more to the top brass, the others down the line are going to stagnate for two more years without promotions. They have all worked up over time for their promotions. So, something like this can lead to a lot of unhappiness.

    This proposal to hike retirement age formally came up when I was Cabinet Secretary. I was just going to turn 58, but I attacked it strongly and I gave my reasons. My view was that the government needed to bite the bullet. I told him (Chidambaram) that if you dont want to pay them now, bring a new rule that you will allow you to stagger the PF payments. Though it was a Finance ministry proposal with the Finance Minister bringing it up and the PM had agreed to it, I still spoke up at length and convinced all of them that it was counter-productive. The pro-posal was dropped.

    Outside the meeting room, PM Gujral called me and said, I thought you would be the last person to oppose it. You were going to benefit. You would have got two more years of service. I told him that I never look at a proposal thinking whether it benefits me or not. These are public proposals and not private proposals. This was one area where I opposed some-thing quite vehemently on the merits of the case.

    However, after I left retired at 58 Prime Min-ister Atal Behari Vajpayee in the next two months raised the retirement age to 60 years. Three months earlier, I would have benefited.

    Let me share another example. This was during the Presidents rule in Uttar Pradesh soon after Babri Masjid was demolished on December 6, 1992. A week after the demolition, I was asked to go to the state as Chief Secretary as the state was in crisis. There were riots going on in 30 places. Two days after I joined, I still had my usual round of welcome parties. The then Governor B. Satya Narayan Reddy asked me to come and meet him immediately. I asked him the reason and he told me that he had finalised the list for postings and transfers for all Ima

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  • You are in-charge there and you do whatever is correct. It is important that right people be in right places. I want that state to be peaceful and we should move towards normalcy, the PM said. I came back to the Governor and told him categorically that no transfers shall take place and that I had spoken to the PM. I then asked him: Is Jitendra Prasad the Governor here? How can you have authority without responsibility? If he does these transfers and things go wrong riots continue or something else hap-pens you and I are responsible. He is doing it with a Congress perspective, not from the point of view of Uttar Pradesh.

    Let me give you another example from the early seventies. This was in 1971-72 and it was my first experience of organised corruption. Those days, the government used to distribute steel for the small scale sector at concessional rates. And sometimes, the premium in the market above these government rates was 100 per cent. So the market price was Rs 4,000, the official price was Rs 2,000 and the margin was Rs 2,000. We had a Director of Industries in UP government called Sharma. He had perfected a system where he made a lot of money by giving approvals to false units for obtaining steel, setting up middlemen to get huge loads in rakes from Jamshed-pur and then selling it to factories at a premium. My problem was that as the managing director of the UP Small Industries Corporation, I was directly respon-sible for the allotments. So, I went and told Sharma that we must have a roster system on which we have the list of units and then distribute it. Tomorrow if

    genuine industries complain saying they are not get-ting this steel, they will come to me and not to you. He didnt agree and we had a huge fight about this issue. In fact, one day as I was entering a social gath-ering, he quietly took me outside. You are standing in my way. When I see a snake I stamp my foot and kill it. This is what I used to do in my village, he told me. I humbly asked him to get me transferred if he so desired. I also told him that only God had the power to do anything more than that.

    Kamlapati Tripathi was the then chief minister. His daughter-in-law Chandra was popularly known as Bahuji. Sharmas way of keeping the political system manageable was that he would allocate 500 tonnes to Bahujis units. Thirty years back, Rs 3-4 lakh was a lot of money. This was the way it went about for a year or so. But it caught up with him. Somebody wrote to somebody and soon there were CBI raids and he was caught. Two years later, I was the Personnel Secretary in Lucknow. Around 9 a.m. as I was sitting in my office, I saw a man walk up. It was the same Mr Shar-ma. He had lost weight and looked hassled. He had been my boss so I stood up and offered him to sit. He told me that the CBI had filed the chargesheet and the matter was in court now. Ironically, the file was to come to me for the state governments approval for the CBI to file a chargesheet. I want you to refer the matter to the Legal Remembrancer (LR). I will speak to him and kill it there, Sharma said. I told him that it was against normal procedure. He pleaded with me saying he was an old man and that he was unwell. So, despite all the history, I broke procedure and said in my note on the file that since there is a legal angle to the matter, it may be referred to LR. Sharma did manage to get the procedure delayed but within a year, he died.

    It is necessary for people to stand up. They do not necessarily have to be antagonistic or negative after all they are all partners in getting things done. It is not that a finance head is the enemy of the CEO. They are working together and contributing to the success of the same team. But sometimes, one needs to stand up and say over my dead body maybe not in so many words but you can say you do not agree and put it in writing. My learning right through has been that people who take short cuts do not thrive in the end. Their nemesis comes to them in some form or the other. It may take a long time. Lalu Yadav may have managed for 20 years, but he is going to have a bad five years in jail. Imagine that with your morning tea, you are wondering what the court will say today or which inspector to bribe and how much. Why should you spend life like this?

    Sometimes, one needs to stand up and say over my dead body maybe not in so many words but you can say you do not agree and put it in writing.

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  • S RamadoraiChairman, National Skill

    Development Agency

    Education B.Sc in Physics - Delhi

    University; Bachelor of Engineering in Electronics and

    Telecommunications & M.Sc in Computer Science from University

    of California.

    agE68

    Prior rolEsCEO and Managing Director of TCS. I

    am talking about the early 1980s. It was the time when TCS was a young company. We were in discussions with Indias flagship carrier Air India, which was looking for a computerised reserva-tion system. We believed that this was an opportunity for nation-building in the airlines reservations space and we could create an

    intellectual asset, a passenger reservation system software, in this case. The asset could have been either owned by Air India or jointly with us. We were in discussion with Air India and we were open to all possibili-ties. Our stance was that if Air India was not going to fund the project and we would have had to put our resources, the national carrier could

    There are things you must stand up for

    Anniversary Specialthe truth

  • awarded the contract for the project. TCS was too big a company to be impacted by not getting one project. But it is the passion that we bring to the job that was driving us and that is why we followed up with the officials when we were not allowed to bid.

    As we have seen on some other occasions, there are some interests at work when contracts are on offer and a bidding process has to be followed. But we believe that when it involves the nation, we should make sure we put our best foot forward.

    Even if you are a small company, there are some things for which you must stand up. A smaller com-pany may not be able to stand up strongly in such a situation. But if they are questioned about their core expertise, they too should stand up against that.

    A growing economy like India needs to build national expertise and intellectual assets in various areas. When TCS was chosen to build IT systems for BSE, they trusted us even though we may not have had the relevant experience. This kind of behaviour was not seen in the case of the Commonwealth Games. Of course, later we won NSE on merit.

    If similar opportunities present themselves again, we will handle it the same way, with the same amount of passion. And if we are told we cannot bid again, we will perhaps argue with a lot more vigour than what we did last time. We have got a lot more experience behind us and I believe no one should be denied an opportunity to participate.

    expeRt advIce A smaller company may not be able to stand up strongly in every situation. But if they are questioned about their core expertise, they too should stand up against it.

    not have claimed the ownership of the intellectual property. Quite obviously a most fair proposition.

    We discussed the issues with them threadbare. Air India, after evaluating the options, decided to purchase the software from an overseas company, Univac. The deal also involved buying their hardware that would run the reservation system. We were most disappointed about this but we did not remonstrate. This methodology was something pioneering that we would have been proud of.

    During those days, conservation of foreign exchange was critical for India during the 1980s and hence we thought that instead of purchas-ing from a foreign source, developing intellectual property that belonged to India would be of great importance. We raised the issue at the right places to sensitise the government about the issues. But Air India was unwavered.

    Any collaboration between private sector and gov-ernment should be viewed and evaluated through the lens of nation-building and creation of national assets. This requires commitment from both govern-ment and private sector. This commitment involved financial aspects, intellectual participation and joint asset ownership, which I did not see in this case.

    Not getting that particular contract still rankles. That is why nearly 30 years later, I am still talking about it! It was an opportunity for us to build some-thing for the nation, which we could not do.

    Another similar incident happened before the Commonwealth Games in Delhi, where companies were invited to bid for providing software support for the games. The terms and conditions for qualifying for the bidding process was such that Tata Consul-tancy Services (TCS) did not qualify! When we got to know that, we met with the top officials of the organ-ising committee of the games and asked them how could bringing in more competition, by allowing TCS to bid, harm the project?

    We took the matter to the head of the Common-wealth Games Organising Committee and other officials. We explained to the top members of the organising committee that we had proved our mettle around the world in much tougher markets and with more demanding customers and, as the biggest soft-ware company in the country, we should have been at least allowed to bid. Initially, it did not work but we persisted.

    Since we repeatedly raised the issue, it had one definite impact we were finally allowed to place our bid. We put the same passion to bidding for the proj-ect that we otherwise would do for any other contract. But we were not among the companies which were Ima

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  • In 1982, when the Indian government wanted to attract investment, they were asking NRIs to invest. Responding to this request, I bought shares in DCM and Escorts. To my surprise, I came to know that in both companies, the families who called themselves the owners held far fewer shares than

    I had acquired. While I held 13 per cent in DCM against the 10 per cent owned by various members of the Shri Ram family, in Escorts, I held 7.5 per cent against 5 per cent held by the Nanda family.

    As soon as they realised this, the managements panicked and started campaigns against me, supported of course by all the other senior industrialists who were in an equally weak position. When I started studying their balance sheets I raised the following points:

    Concern about the use and misuse of funds including govern-ment finances for purposes other than companies benefit.

    Concern about the investment of public funds in public com-panies that were controlled by managements who had limited financial interest in those businesses.

    Concern about the managements diverting funds from public companies for their private businesses.

    Untrustworthy balance sheets Concern about the impact of the actions of these managements

    like their refusal to register my legally acquired shares on the financial structure of Indian business, on the markets, on stockbrokers, on all owners of shares and other negotiable instruments, on the integrity of investments.

    Concern about the relationship between NRIs and the Indian business establishment.

    It was important that everyone knew the truth. The poor share-holders needed some form of protection. In spite of the fact that I lost money and went through a lot of pain and harassment, I take great satisfaction in the fact that the public the ordinary people respect me because I saved some of their hard-earned money from being wasted.

    The Indian public companies have not been the same since that era. I believe you should always fight for what you believe in and I would urge anybody in a similar position to stick to their principles even if the cha

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