7India Inc’s Most Powerful CEOs 2012{ }Corporate Dossier THE ECONOMIC TIMES

May 25, 20126

Amartya SenHarvard

University

Ram Charan

Vijay Govindarajan

Tuck Business Schiool

Pankaj Ghemawat

IESE Business School

Tarun KhannaHarvard

Business School

Jagdish ShethGoizueta

Business School

Nirmalya KumarLondon Business

School

Nitin NohriaHarvard

Business School

Bala Balachandran

Kellogg School of Management

Jagdish Bhagwati

Columbia University

StillOnTopContinued from pg 5

As the 2012 list shows, much of the lead-

ership of these firms has been trained in

the world's best business schools. Ratan

Tata has a degree from Cornell, Azim

Premji trained at Stanford, Anand

Mahindra has an MBA from the Harvard,

Kumar Mangalam Birla has a London

Business School degree.

These are not new groups, although

their business aggressiveness and their

ability to think in global terms is a new

phenomenon, which has been sharpened

by the more pro-business atmosphere of

the post 1980s. Not surprisingly many of

the larger groups have incorporated

managerial capitalism with family capi-

talism since at least the 1970s and have

thus been able to rise to the challenges of

liberalisation. Further, daughters are in-

creasingly becoming part of succession

planning, inheriting assets and entering

boardrooms. Prime examples would be

Manjushree Khaitan of the BK Birla

Group and Priya and Priti Paul of the

Apeejay Surendra Group.

What is clear is that business as an ac-

tor has been able to negotiate several dif-

ferent regimes - the Nehruvian period

was an especially difficult one when

business, which was hoping to be a play-

er in the newly independent nation state,

was sidelined by the general anti-busi-

ness rhetoric, the licenses and permits.

There was brief relief in the 1960s but it

proved to be too short lived. A worsening

atmosphere came thereafter epitomized

by Indira Gandhi's disdainful comments

such as 'our private enterprise is more

private than enterprising.' It is only with

liberalisation that the private sector is

beginning to be seen as a legitimate part-

ner by the state.

This new scenario has been enthusias-

tically received and channelised into

measures, which have made private en-

terprise globally competitive. These

measures include corporate restructur-

ing, focusing on core competencies, im-

plementing management changes and en-

hancing competitiveness as they aspire to

global status. Larger groups have shown

concerns that 'reputation' and 'high

brand equity' should not be compromised

in the face of rapid expansion and major

acquisitions.

Not surprisingly, the Tatas were among

the earliest groups to implement a new

code of ethics and 'brand equity Business

Promotion agreement' and a 'Tata Busi-

ness Excellence Model.' A confident pri-

vate sector has gone on a global acquisi-

tions spree with fierce aggressiveness.

The acquisitions are impressive especial-

ly. Amongst the most symbolic is the

takeover from Ford of Jaguar and Land

Rover which heralds the acquisition of a

'symbol of British style', the makers of

'James Bond's new wheels' and 'Inspector

Morse's classic.'

Godrej is aspiring to global status

through acquisitions of local brands in

the personal care line and the AV Birla

group in aluminum and carbon black.

However, this could only be maintained if

the pro-business atmosphere which was

inaugurated with the economic reforms

of the late 1980s and especially post 1991 is

sustained. Unfortunately, this seems to be

evaporating in the UPA II dispensation.

Family business has thrived under liber-

alisation and has been able to forge mean-

ingful links with MNCs in a confident way.

The next challenge that lies before fam-

ily business relates to what may happen

to the retail sector, particularly in the con-

text of the issue of entry of FDI. Walmart

and 'Mom and Pop' run retail shops need

not necessarily be adversaries. There

may exist develop complementarities

through the forging of relationships to

mutual advantage. In any case the invest-

ment in logistics and supply chain would

ultimately benefit the lower and medium

segments of the retail sector energizing

the vibrant bazaar component of the In-

dian economy.

The author is a business

historian based at the

National University of

Singapore. She has written

widely on Indian business

and has recently edited The

Oxford India Anthology of

Business History (Oxford

University Press, 2011)

Continued from pg 5

By the end of the 1700s, the Company had

undergone a curious change; it had begun-

to rule a part of India in the name of the

Mughal Emperor. This was the beginning

of the British Empire in South Asia. Why

did a group of foreigners succeed so dra-

matically as traders in the Indian Ocean?

And why did a group of traders decide to

capture power in a distant land? In the

1600s the Company was an upstart in In-

dia, smaller in scale than almost any of

the large Indian family firms operating

from the Indian coastal trading towns like

Surat, Masulipatnam, and Hooghly, and

desperately trying to defend its operations

against attacks by European rivals, the

Dutch and the Portuguese. An empire was

a prospect beyond dreams.

Yet, collectively, the Europeans did pos-

sess three strengths that the greatest Indian

firms did not have. First, the Europeans had

knowledge of long-distance navigation.

They understood charts, maps, ocean cur-

rents, instruments, routes, and the tech-

nique of making sturdier and larger ships

carrying guns on board much better than

did the Indian seafaring merchants. The Eu-

ropeans, thus, had developed a truly global

understanding of the oceans long before the

other ocean-bound cultures. Indians were

good navigators, but they did not venture be-

yond the Indian Ocean. Second, the Compa-

ny could procure lots of Spanish silver. In

turn, their capacity to do so had owed to the

presence of well-developed financial mar-

kets in Europe of this time. In India, bank-

ing was less developed, money changed few-

er hands, and interest rates were higher.

The biggest advantage the Company pos-

sessed stemmed from its identity as a joint

stock firm. In Asia, the biggest firms fi-

nanced investments with their own money,

family savings, or at the most, money bor-

rowed from members of the same caste or

community. The idea of the joint stock was

unknown. That idea allowed the East India

Company to pool in huge amounts of mon-

ey, and make use of the economies of scale

available in overseas trade. It could build

an elaborate infrastructure consisting of

forts, factories, harbours, and ships. Joint

stock also made them better risk-takers.

The Indian traders spread risks by dealing

in a variety of goods in auction-type ex-

changes. They were what the Dutch histo-

rian Jacob van Leur had called 'peddlers' of

the oceans. The Company, thanks to its ca-

pacity to absorb risks, dealt in a few goods,

which it bought on large scale. Being spe-

cialised, it needed to contract with a specif-

ic set of suppliers year after year and to pay

out vast sums of money as advances.

Contractual sale of goods was not un-

known in India before, but contractual

sale on such a scale by a single firm had no

precedent. The need to protect its ports

and harbours from numerous enemies

made the Company keen to own ports. The

three leading examples, Madras, Bombay,

and Calcutta, represented quite a differ-

ent business culture in coastal India.

Whereas Surat and Masulipatnam had be-

longed to states that lived mainly on land

taxes, the Company towns were ocean-

bound, and had no ties with land. Bombay,

Calcutta, and Madras were no ordinary

ports. They were ports where seafaring

merchants, rather than landlords and

warlords, made laws. The Company

towns, therefore, were attractive to Indian

merchants as well. In the 1700s when the

Mughal Empire started breaking up and

warfare broke out in the interior, hun-

dreds of wealthy Indian merchants and

bankers fled to the Company towns. They

were a huge source of support for the

Company's political adventures.

We need not overdraw these strengths.

The Company's own business privileges,

which were a monopoly granted by the

British Crown, were constantly under at-

tack fromprivate traders and even its own

employees. The relation between Indian

firms and the Indian rulers was based on

informal understanding, but the Euro-

peans did not enjoy such trust and good-

will. They had to take out license to trade,

and pay massive bribes to the Indian kings

and their henchmen. They also had to

keep an army of paid agents to procure

goods. These contracts had no Indian

precedents, and therefore, they were not

protected by any Indian law.

Contracts were broken often, and the

Company could do little when they were

broken. In order to avoid such situations,

the Company recruited its chief agents

carefully. They were often individuals who

held power over the textile artisans. At the

same time, they were more knowledgeable

about India than were the Company's own

officers. The Company officers disliked

this dependence and hated the agents.

Lastly, unlike a modern firm, the Compa-

ny did not have a unitary command-and-

control structure. Its overseas enterprise

was a peculiar combination of modern

joint stock principle in raising money and

pre-modern partnership in management.

The two partners were the sedentary City

merchants and peripatetic sailors and sol-

diers. These two classes were not friendly

at home. But the sailors and soldiers

joined the venture on the promise that

they could trade a little on the side.

Still, it was the latter that had to deal

with hostile kings and untrustworthy

agents in India, which made them more ag-

gressive and opportunistic than the share-

holders back home. The sailors and sol-

diers were the people who made the moves

that led to the empire in India, often against

the instructions of the shareholders.

The Company's success, in conclusion,

had much in common with the ingredi-

entsthat many modern multinational

make use of - capacity to absorb risks, ca-

pacity to think on a world scale, access to

deep financial markets, and access to in-

formation. Its weaknesses too were sur-

prisingly modern in character - miscalcu-

lation of political risks and unreliable lo-

cal partners. But the Company was also

quite unique. For one thing, it was a firm

with a split personality, torn between mer-

chants and soldiers. For another, it

reached its peak during an unusual mo-

ment in Indian history that saw the col-

lapse of a great medieval empire. That mo-

ment gave the sailors and soldiers the

chance to take hold of the reins of the

Company, giving birth to

another empire.

The author is Professor of

Economic History, London

School of Economics and

author of The East India

Company...The World’s Most

Powerful Corporation

The First Multinational The Economic Times, in partnership

with IMRB International, has been

conducting comprehensive surveys to

ascertain the 'Most Powerful CEOs' of

India, for the past few years. The survey has en-

deavored to identify the business leaders who

are well-recognised by people for their efforts

in shaping Corporate India.

The survey was conducted through a five-

step process:

A. Collating the list of CEOs across sectors

B. Setting evaluation parameters

C. Calculating the parameter-scores

D. Free association & rating of CEOs on each

evaluation parameter

E. Ranking of CEOs at an overall level

The team at IMRB International was provid-

ed with a list of CEOs, collated mainly from

this year's ET 500 rankings as well as previous

years' rankings of 'Most Powerful CEOs' with

relevant additions and removals in line with

the current corporate scenario. The aim was to

arrive at a final short-list of top 100 CEOs to be

crowned as the 'Most Powerful CEOs' of corpo-

rate India for the current year.

The CEOs were then evaluated by corporate

people in senior/middle management roles on

six important parameters - 'Leadership', 'Strat-

egy & Innovation', 'Performance', 'Stature', 'So-

cial Contribution/ Sustainability', and 'Gover-

nance'. The respondents were from large com-

panies selected by referring to databases like

the ET-500. The respondents were requested to

participate through an invite from The Eco-

nomic Times.

The corporate respondents were divided

into sector-wise panels, and each panel was in-

vited to share their feedback on CEOs from

their sector. In order to control respondent

bias, we discounted the respondent's opinions

on his/ her own company's CEO. The respon-

dents were asked for their inputs using a small

survey-instrument, which could be self-admin-

istered or administered face-to-face by sea-

soned interviewers. The survey-instrument

captured inputs on the respondent's CEO-asso-

ciations across each parameter. The respon-

dents were also invited to add one CEO (to the

list) that he/she considers as

most powerful. This ensured

that the opinion of the respon-

dent was not restricted to the

given list of CEO's.

PROCESS:

The respondents were first

asked to allocate points to the

six parameters, which would

add up to a total of 100. The

points were allocated on the ba-

sis of importance of each at-

tribute as per their opinion.

This helped us to arrive at the

sector-wise and overall param-

eters-weights which were used

in the final analysis. For deriv-

ing the weights we considered

only those scores which were

obtained from management re-

spondents belonging to the

senior corporate profiles, like

the Vice President, Asst. Vice

President, General Manager

and the like.

After determining the pa-

rameter-scores, we

checked for the respon-

dent's familiarity with

each of the CEOs given in

their specific survey-in-

strument. For CEOs the re-

spondent was adequately

familiar with, opinion on

each parameter was cap-

tured using the 'free associ-

ation method' followed by a

rating on a 3-point associa-

tion-scale. In this, respon-

dents were given a parame-

ter and were then requested

to mention which of the

CEOs in the list they associate

that parameter with. The re-

spondents had the freedom to associate as

many CEOs that they felt could be associated.

Once they have associated the CEOs for that

particular parameter, they are then asked to

rate each CEO on a scale of 1 to 3, wherein 1 sig-

nifies a weak association, 2 signifies a moder-

ate association and 3 signifies a strong associa-

tion.

Then for each CEO a composite score was

calculated at a respondent level. Across re-

spondents, the sum of these composite scores

gave us the power score for the respective CEO.

The higher the power score, the higher the

rank assigned to the CEO.

Finally, we obtained a cross-sector ranking

of the CEOs. For this, we indexed the scores for

the CEOs across sectors and thereby obtained

the master list of top 100 CEOs.

METHODOLOGY

Chanda KochharICICI Bank

Kiran M ShawBiocon

Shobhana BhartiaHT Media

Shikha Sharma

Axis Bank

Naina Lal KidwaiHSBC India

Kalpana MorpariaJP Morgan India

Mallika SrinivasanTAFE

Roopa KudvaCRISIL

Preetha ReddyApollo Hospitals

POWERPLAY

Global Indian

ThoughtLeaders

Global Indian Business Leaders

1 2 3 4 5 6 7 8 9 10LN

MittalArcelorMittal

Indra NooyiPepsiCo

Nikesh AroraGoogle

Vikram PanditCitigroup

Harish Manwani

Unilever

Anshu Jain

Deutsche Bank

Ajit Jain

Berkshire HathawayReinsurance Group

Shantanu Narayen

Adobe Systems

Vinod Khosla

Khosla Ventures

RakeshKapoor

Reckitt Benckiser

1 2 3 4 5 6 7 8 9 10

Nitin Paranjpe Hindustan Unilever

D Shivakumar Nokia-India,

Middle East & Africa

Rajan Anandan Google India

Bhaskar Pramanik Microsoft India

Naina Lal KidwaiHSBC India

Kalpana Morparia JP Morgan India

John FlanneryGE India

Neelam Dhawan Hewlett-Packard India

Shanker Annaswamy IBM India

Sanjeev ChadhaPepsiCo Middle East & Africa

1

1 3 5

2 4 6 8 10

2 3 4 5 6 7 8 9 10

Top Women CEOs

Most Powerful MNC CEOsNeelam Dhawan

Hewlett-PackardIndia

97

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