• Home
• /
• Opinion

When corporate greed knows no bounds

You have to watch out for it, because the more you have it, you get used to comforts, and you get used to, you know, big houses and vacation homes and going and doing whatever you want, and so it is very seductive. However much you say that you will not fall into the trap of it, you do fall into the trap of it." That was the now tainted McKinsey & Company chairman Rajat Gupta referring to money at Columbia University in New York in 2003. In a little over a decade, Gupta would be charged with insider trading and fall victim to what his biographer Anita Gopalan has called 'billionaire envy', or the lust for zeros.
In India, this lust seems to have become an epidemic. Whether it is professional bankers like former ICICI managing director and chief executive officer Chanda Kochhar or former chairman of IL&FS Ravi Parthasarathy; businessmen as varied as diamantaire Nirav Modi, Ranbaxy brothers Malvinder Mohan and Shivinder Mohan Singh, or the man formerly known as the 'king of good times', Vijay Mallya, there seems to be what Hemindra Hazari, an analyst with the Securities and Exchange Board of India, calls "the arrogance of entitlement by abusing one's position." All of them believe they are above board.
Rana Kapoor, co-founder of Yes Bank, which was put under a moratorium by the Reserve Bank of India last week, is one of a long line of such real-life Gordon Gekkos.
Only their 'greed is good' philosophy is cloaked in public with a veneer of generous philanthropy and ethical business. Somewhere in their past there lies an original sin which makes financial Frankensteins of them. In the case of Kapoor, it was the brutal takeover of the company after the death of Ashok Kapur, his partner and brother-in-law, in the 26/11 attack on the Taj Mahal Palace hotel, Mumbai. It took a bitter, decade-long legal battle by Madhu Kapur, Ashok Kapur's widow, to get her daughter, Shagun Gogia, a seat on the board of directors and some accountability. But that was only after the RBI directive to Yes Bank to restrict Rana Kapoor's tenure till January 2019.
In the case of Ranbaxy, the original sin was the sale of the company to Japanese firm Daiichi despite it being investigated by the US Food and Drug Administration and the Department of Justice. These potential offenders find the market rewarding their rapacious behaviour. So, what were once considered risky actions flirting with illegality, are soon described as entrepreneurial risk-taking, and what was borderline unprofessional, becomes innovative practices. This feeds into illogical expectations and eventual criminal behaviour. In the case of Chanda Kochhar, it was getting away with a clear case of conflict of interest-with Videocon Group chairman Venugopal Dhoot investing Rs640 million in NuPower in 2010 and later the proprietorship of the company being transferred to a trust owned by her husband, Deepak Kochhar, for Rs900,000 after Videocon Group received a loan of Rs32.5 billion from ICICI Bank in 2012. Call it collusion, poor corporate governance or the absence of regulation, it meant that bad behaviour was consistently being rewarded.
Nirmalya Kumar, Lee Kong Chian Professor of Marketing at Singapore Management University, says the banking model in the growth years was to lend to people based on their perceived reputational ability to pay rather than a systematic evaluation of the borrowers' cash flows to service the debt. "The market," he says, "was rewarding banks for growth. The result was that unless growth and profits continued, there was no ability to service the loans given. Borrowers flush with easy money were doing acquisitions and investing in projects that needed a lot of luck for the banks to have any chance to be repaid."
Then there are the toys of success that are so hard to resist for these 21st century Gekkos. The apartment block for Rs1.28 billion next to Mukesh Ambani's Antilia in the case of Rana Kapoor. The annual spot at Davos' World Economic Forum for Chanda Kochhar. The IPL team for Mallya. The glossy brand ambassadors for Nirav Modi.
The display of wealth requires the showcasing of baubles in the form of magazine covers (for promoters and their children), sponsorship of high-profile media events and even awards for corporate governance. Such public image-building usually goes hand-in-hand with private beastliness as was the case with Kapoor whose outbursts after and during office hours were well chronicled. Money is also used to purchase political access as was the case with IL&FS aggressively pursuing certain politicians for infrastructure projects.
But what makes someone like Rana Kapoor or Chanda Kochhar falter? Greed? Poor corporate governance? Billionaire envy? All of the above? What makes them different from legacy business firms? Is it pure overleveraging, or unforeseen economic downturns or honest mistakes in the case of established business houses rather than corrupt business practices passed off as innovations, such as Rana Kapoor's fee income on big loans which he often negotiated himself?
Media analyst Dilip Cherian believes a certain kind of capitalist will always have trouble because of unbridled and extreme avarice. Greed for profits is intrinsic to the engines of capitalism. But such greed cannot flourish without political patronage, poor corporate governance by the board, bureaucratic collusion and lack of proper regulation.
Whether it is Jet Airways or Hindustan Powerprojects (HPPPL), there is an addiction to the headiness of success which transforms itself into plain greed. In the case of Jet Airways, it was promoter Naresh Goyal's belief in his own infallibility which made the airline go belly up. Ratul Puri, chairman of HPPPL, once the poster boy for the 'Made in India' success, now finds himself the target of investigations by three agencies - the CBI, the ED and the Income Tax authorities.
At the end of The Wolf of Wall Street, a sobering movie about real-life stockbroker Jordan Belfort, the actor playing him, Leonardo Di Caprio, says: "What I sincerely hope is that my life serves as a cautionary tale to the rich and poor alike: to anyone who's living with a spoon up their nose and a bunch of pills dissolving in their stomach sac; or to any person who's considering taking a god-given gift and misusing it; to anyone who decides to go to the dark side of the force and live a life of unbridled hedonism." Don't. Go. There.
- Open magazine