Business Briefing 29/05

To Each His Own Fate, Finally; Why We Love Corruption

As the warring Brothers Ambani kicked off the process of rapprochement by scrapping the ‘non-compete’ agreement they’d signed, there was a collective sigh of relief from shareholders to policymakers and politicians. It can’t be mere coincidence that the two brothers met the Prime Minister, separately, a week before they went public with the annulling of the agreement. On the face of it, if both Anil and Mukesh are free to fight each other fair and square in the marketplace, won’t it add to the rancour? Not quite. For the Centre, each round of sparring between the brothers—for instance the KG Basin gas price row or Anil’s failed bid to acquire South African telecom giant MTN—meant collateral damage. The conduct of some Cabinet ministers would almost always be up for questioning too. While the new arrangement allows Mukesh’s RIL to enter hyper-growth businesses such as telecom and financial services, Anil’s benefits are more immediate. RComm, the flagship telecom firm that he inherited after the split, had its overseas acquisition-led growth scuppered. This happened because Mukesh had the first right of refusal if Anil wanted to sell any of his stake in the company. Large overseas deals almost always involve share swaps, which RComm would now be free to enter into. With ADAG already present in mass consumer businesses like telecom and film entertainment, it could leverage that expertise to branch out into organised retail. ‘We think it is extremely unlikely that RIL will enter the telecom sector at the current juncture given the hyper competition… regulatory risks and the likely slowdown in industry growth… [But] RIL can buy out an extant player. RComm may have the flexibility to partner a new entity and/or sell itself in case the first right of refusal with RIL has been removed,’ says a Kotak research report. Heave a sigh of relief.

Why does Sachin Tendulkar earn more for a single ad shoot than the entire lifetime earnings of a municipal school teacher or a government doctor? After all, the services they offer are of far greater social utility than the momentary joy from a Tendulkar straight drive. Why is corruption widely condemned, yet widely practised? V Raghunathan’s new book The Corruption Conundrum and Other Paradoxes and Dilemmas (Penguin, Rs 450) offers cute little explanations for many everyday paradoxes, and it has the same easy style of his previous bestseller Games Indians Play. This book will make you more curious about the world around us. It takes the reader through some interesting illustrations—well known as well as the less common examples—in the fields of management, finance and work life. Raghunathan argues that if corruption is the conquest of greed over fear, its antidote must be the opposite. ‘The fear of being caught and penalised must exceed the greed of profit or rent seeking by the corrupt.’ Not quite India’s Malcolm Gladwell, but thought provoking all the same.

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arindam