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We are planning to buy a minivan and last weekend I went to test drive a few. Now, you don’t expect a lot of profound thoughts to come from your car salesman but then, you never know where you might pick up nuggets of wisdom. While driving the van, we started talking about why we need a minivan and I told him about my daughter, and my dog at which point he reminisced about his dog as well which he had to put down at the age of 17. “Can’t complain though”, the guy said, “I have two teenager boys and the dog was with them from the time they were born – he helped raise two kids, he did his job.”
 Mojo What a way to describe what his dog did for him and his family and most likely, there wasn’t an iota of exaggeration. I think only people with dogs in their family can related to what he said and I immediately thought of Mojo and how he is already helping to raise our daughter. He sits at her feet, he is always protective of her, he is restless when she is not around. I can see her becoming a more humane and responsible person because she will be taking care of a loving creature right from her childhood. I am so looking forward to Mojo help raise my daughter as well.
I love the colorful and rich print ads in Indian media. So much more fun than the bland American ones.
We expected to find that changes in incentive systems, especially executive incentives, would be highly correlated with making the leap from good to great. With all the attention paid to executive compensation – the shift to stock options and the huge packages that have become commonplace – surely, we thought, the amount and structure of compensation must play a key role in going from good to great. How else do you get people to do the right things that create great results?
We were dead wrong in our expectations.
We found no systematic pattern linking executive compensation to the process of going from good to great. The evidence simply does not support the idea that the specific structure of executive compensation acts as a key lever in taking a company from good to great.
Where is this blurb from? Not from a left leaning economist or columnist but from the book Good to Great, written by former Stanford Graduate School of Business faculty member Jim Collins. How does this fit in the current brouhaha over executive compensation of bankers? We’ve been told by many smart people that these investment bankers, and traders, and myriad other professionals in the finance industry are the best and the brightest and that they need to paid very highly if you want to create winning companies. But that’s not what Jim’s data says. In the same section, Jim further elaborates:
Most importantly, when we analyzed executive compensation patterns relative to compensation companies, we found no systematic differences on the use of stock (or not), high salaries (or not), bonus incentives (or not), or long-term compensation (or not). The only significant difference we found was that the good-to-great executives received slightly less total cash compensation ten years after the transition than their counterparts at the still-mediocre comparison companies.
So what’s going on here? Who’s right and who’s wrong? Why do smart people keep claiming that bankers need to be paid those astronomical bonuses to keep them motivated when clearly, leaders in well managed, great companies did not? I can think of only one reason – the job of a banker does not have any built in job satisfaction, no reward for building a great product, no reward for improving the lives of other people, no reward for making people happier. After all, these people getting into the banking business are really smart, they have to be and they could have designed the next iPhone, discovered the next bio-tech breakthrough, created the next generation of hybrids. But they are busy creating credit default swaps, or collateralized debt obligations, or buying and selling stocks all day long. At the end of the day, what value have they created to bring them job satisfaction? That job satisfaction needs to come from somewhere – and that apparently comes from those outsized bonuses. If you cannot impress your girlfriend or wife by talking about what you did during the day, atleast you can impress her by ordering the most expensive wine at the restaurant. If your child cannot explain in front of his class what his or her dad does, then you can try to buy that disappointment with the most expensive toy.
And that in my opinion is the secret behind the banker compensation – the only way in which you can have really smart people commit to a life of CDSs and CDOs.
Now that the Valentine’s Day 2009 and the Pink Chaddi campaign is in our rear view mirror – it’s` a good time to analyze the real significance of the campaign and what it portends for the Indian society. The campaign, if you want to read the tea leaves, shows why India has never been and never will be Talibanised, why it will never become a Saudi Arabia, an Afghanistan or a Pakistan.
There is a strain in the Indian population, that views any sort of extremism with extreme distaste and disgust; there is this natural tendency to pull back from extremist views and actions. This was demonstrated in the defeat of the four BJP state governments post Babri Masjid demolition, this was demonstrated in BJP’s governing style when they were forced to govern from the center during the Bajpai government and now, the Pink Chaddi campaign is a great example of this strain. What was even more laudatory about this campaign was the way in which the Indian society registered its protest. There were no violent demonstrations, no agitations – just a humorous, tongue-firmly-in-the-cheek idea that poked fun at the extremists, ridiculed their nickname (chaddi-wallahs) and made them look extremely silly.
This idea of protesting at injustice in a non-violent manner is extremely Indian – or if I might dare say it, extremely Hindu. I firmly believe that the reason why India has stood as a stalward of secularism and a multi-cultural society while countries around it like Pakistan, Bangladesh, Sri Lanka have fallen prey to ethnic and religious divides is the benign and accomodating views of its Hindu majority. This could be due to the flexibility of the Hindu religion and culture or some other reason, but the strain is there – the Pink Chaddi campain again proves it. We have to zealously guard ourselves to make sure that we preseve and pass on this strain to our future generations and to not let the Modis, Thackereys and the different Senes of the world take over the Indian society. It is a very short road from beating up women for visiting the pubs to beheading them for wearing skirts and lets keep that road closed forever.
Flouting rules comes easy to us, unless of course someone is there with a danda monitoring us. The higher we are in the socio-political power structure, the bigger danda we need to keep us in line – there are no exceptions from the poor day laborer to the richest person, everyone tries to get away with as much as possible. Now, this is nothing unique to India – I’ve been told that Italians are in close competition with us. But I do believe that we (and most likely the subcontinent) might be unique in the extent of this behavior. From the smallest regulation like the requirement to wear the seat belt to doing a Satyam, our society is ridden with this behavior.
Thus this report in Hindustan Times comes as no surprise to me – have opportunity, will flout a rule even though it makes life more difficult for everyone else around you.
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