7 India Inc’s Most Powerful CEOs 2012 { } Corporate Dossier T H E E C O N O M I C T I M E S May 25, 2012 6 Amartya Sen Harvard University Ram Charan Vijay Govindarajan Tuck Business Schiool Pankaj Ghemawat IESE Business School Tarun Khanna Harvard Business School Jagdish Sheth Goizueta Business School Nirmalya Kumar London Business School Nitin Nohria Harvard Business School Bala Balachandran Kellogg School of Management Jagdish Bhagwati Columbia University Still On Top Continued 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 T he 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 Kochhar ICICI Bank Kiran M Shaw Biocon Shobhana Bhartia HT Media Shikha Sharma Axis Bank Naina Lal Kidwai HSBC India Kalpana Morparia JP Morgan India Mallika Srinivasan TAFE Roopa Kudva CRISIL Preetha Reddy Apollo Hospitals POWER PLAY Global Indian Thought Leaders Global Indian Business Leaders 1 2 3 4 5 6 7 8 9 10 LN Mittal ArcelorMittal Indra Nooyi PepsiCo Nikesh Arora Google Vikram Pandit Citigroup Harish Manwani Unilever Anshu Jain Deutsche Bank Ajit Jain Berkshire Hathaway Reinsurance Group Shantanu Narayen Adobe Systems Vinod Khosla Khosla Ventures Rakesh Kapoor 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 Kidwai HSBC India Kalpana Morparia JP Morgan India John Flannery GE India Neelam Dhawan Hewlett-Packard India Shanker Annaswamy IBM India Sanjeev Chadha PepsiCo 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 CEOs Neelam Dhawan Hewlett-Packard India 9 7 Ambition makes all the difference . 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