Performance Orientation and Job/Business Security
By: Amit Bhushan Date: 13th June 2014
The demand for repeal of ‘Draconian’ Labour laws is growing by the day with industry not resting on laurels of its repeal in a state alone. The argument is an industry friendly labour law will support industry to invest more thereby enhancing demand for industrial labour like the USA or as in case of China/other South East Asian countries. The argument can be bland or in form of easier exit policy, flexible contract labour etc. The idea is that such laws will help/push labour to be more productive. We do not hear the same pro-performance rhetoric when managements of companies which in Indian scenario is mostly shareholding families are not performing. The logic is that it will drive away investments and deteriorate investment climate or violates secrecy in business.
It is forgotten that we do not have those Draconian labour laws affecting small units where again foreign investment as well as technology imports are liberal. Our SMEs are still shrouded in labyrinth of dismay and not a shade of SMEs in Europe. The situation is despite of a host of policies such as SEZs and Industrial zones and other promotional schemes. It is the other pangs like capital and credit, availability of power, raw materials as inability to reach customers including the management’s commitment to business itself; seem to be of a greater concern. The larger corporates should actually be facing those very problems in nearly same proportion with some additional labour law related woes, however the labour laws seem to get a lion’s share of coverage in media.
The same media doesn’t spend a dime when such large corporates routinely seek financial reprieve from Financial Institutions when large discounts in interest and principal credit amount is sought (which is routinely passed to taxpayers as PSU bank keep seeking re-capitalization and in India this is much higher than say Europe) or they vanish altogether with depositors/ creditors and small shareholders money. We also have routine cost escalations in government project and the user charges in Public Private Partnership projects not being analyzed by media which remains vocal when it has to sell shares and bonds of these large corporates.
Why do we need performance in isolation i.e. labour must deliver while the management should get a bailout which should be passed to the same labour since they constitute the bulk of public. While the argument may have some weight that the USA, China and some other countries have grown out basis the same model of flexible labour and financial laws which are in favour of the management/entrepreneur, however Europe and Japan where laws and practices differ have not too badly either. It must be noted that the US and Chinese model is based on abundance of capital and infrastructure and has very disproportionate wealth distribution although it may have delivered a bit faster ‘growth’. In India with our kind of diversity, concentration of wealth in select few hands may result in political turmoil. What we may need is better labour industry relationship oriented towards performance and a strong facilitation mechanism to propel investments with liberal mechanism for takeover and amalgamations (something resisted by entrepreneurs who want protection). Our FIs have mostly supported the demand from management/entrepreneurs.
Perhaps a liberal law that allows for easy takeover of companies that have not declared dividends in last three-four years or where dividend payout amount in last 3 years is less than 5% of the average of Market Capitalization value would do much more in bringing in investments. It is common knowledge that M&A has brought more investments that say FDI (which the relaxation of labour laws seeks to bring). The management who do not payout dividends because of investment in real growth will be able to command high premium, while those who are struggling will be able to get good valuations. For non-listed companies, the banks should be given greater freedom to either seek a change in management or auction of assets as deemed fit. In such a scenario, we can have then a suitable amendment in labour related laws to bring them at par with Europe provided if they are such a hindrance.
By: Amit Bhushan Date: 13th June 2014
The demand for repeal of ‘Draconian’ Labour laws is growing by the day with industry not resting on laurels of its repeal in a state alone. The argument is an industry friendly labour law will support industry to invest more thereby enhancing demand for industrial labour like the USA or as in case of China/other South East Asian countries. The argument can be bland or in form of easier exit policy, flexible contract labour etc. The idea is that such laws will help/push labour to be more productive. We do not hear the same pro-performance rhetoric when managements of companies which in Indian scenario is mostly shareholding families are not performing. The logic is that it will drive away investments and deteriorate investment climate or violates secrecy in business.
It is forgotten that we do not have those Draconian labour laws affecting small units where again foreign investment as well as technology imports are liberal. Our SMEs are still shrouded in labyrinth of dismay and not a shade of SMEs in Europe. The situation is despite of a host of policies such as SEZs and Industrial zones and other promotional schemes. It is the other pangs like capital and credit, availability of power, raw materials as inability to reach customers including the management’s commitment to business itself; seem to be of a greater concern. The larger corporates should actually be facing those very problems in nearly same proportion with some additional labour law related woes, however the labour laws seem to get a lion’s share of coverage in media.
The same media doesn’t spend a dime when such large corporates routinely seek financial reprieve from Financial Institutions when large discounts in interest and principal credit amount is sought (which is routinely passed to taxpayers as PSU bank keep seeking re-capitalization and in India this is much higher than say Europe) or they vanish altogether with depositors/ creditors and small shareholders money. We also have routine cost escalations in government project and the user charges in Public Private Partnership projects not being analyzed by media which remains vocal when it has to sell shares and bonds of these large corporates.
Why do we need performance in isolation i.e. labour must deliver while the management should get a bailout which should be passed to the same labour since they constitute the bulk of public. While the argument may have some weight that the USA, China and some other countries have grown out basis the same model of flexible labour and financial laws which are in favour of the management/entrepreneur, however Europe and Japan where laws and practices differ have not too badly either. It must be noted that the US and Chinese model is based on abundance of capital and infrastructure and has very disproportionate wealth distribution although it may have delivered a bit faster ‘growth’. In India with our kind of diversity, concentration of wealth in select few hands may result in political turmoil. What we may need is better labour industry relationship oriented towards performance and a strong facilitation mechanism to propel investments with liberal mechanism for takeover and amalgamations (something resisted by entrepreneurs who want protection). Our FIs have mostly supported the demand from management/entrepreneurs.
Perhaps a liberal law that allows for easy takeover of companies that have not declared dividends in last three-four years or where dividend payout amount in last 3 years is less than 5% of the average of Market Capitalization value would do much more in bringing in investments. It is common knowledge that M&A has brought more investments that say FDI (which the relaxation of labour laws seeks to bring). The management who do not payout dividends because of investment in real growth will be able to command high premium, while those who are struggling will be able to get good valuations. For non-listed companies, the banks should be given greater freedom to either seek a change in management or auction of assets as deemed fit. In such a scenario, we can have then a suitable amendment in labour related laws to bring them at par with Europe provided if they are such a hindrance.