26/04/2016 4:03 PM IST | Updated 15/07/2016 8:26 AM IST

Gurus, Money And The Laws For Doing Business

Indian yoga guru Baba Ramdev displays an Indian banknote as he makes fun of people running after money while addressing supporters in Ahmadabad, India, Monday, Feb. 3, 2014. Earlier in the day, addressing the media, Ramdev said he will launch a nationwide door-to-door campaign in support of the main opposition Bharatiya Janata Party(BJP)'s prime ministerial candidate Narendra Modi from March 1 in the run up to the 2014 parliament elections. (AP Photo/Ajit Solanki)

In my column "Without Contempt" in Business Standard, I wrote about the disconnect between the business regulatory framework in India and what businesses actually need for growth and success. I placed the thesis in the context of the resounding commercial success of empires of gurus, a trend that is increasingly being noticed in the media, both Indian and global.

Typically, most of India's corporate regulatory framework blindly adopts what is followed in the Western world--quarterly reporting, public disclosures of material events, obligations to confirm rumours published in the news, public filing of board decisions and the like. By themselves, these are unexceptionable features to have in the regulatory system. Yet, it is critical to examine what nuance is required in their adoption, what the differences are in the social construct, and how to address the need for transparency without killing innovation and commercial competitiveness.

[M]aking money is still...seen as a stigma in the Indian mind. Therefore, most of the regulatory framework governing business is designed on the foundation of suspicion...

For starters, making money is still subconsciously seen as a stigma in the Indian mind. Therefore, most of the regulatory framework governing the conduct of business is designed on the foundation of suspicion and protection against malafide conduct.

For every fraud discovered, a new law is created, without examining whether effective enforcement of existing laws would serve the purpose. The Companies Act, 2013 is a classic example--popularly called the "Satyam Law", the Institute of Company Secretaries of India even conducted a seminar session on the theme of how the Satyam case has left its imprint on the new law. Such a non-visionary and reactive approach based on fear of repetition of misconduct indulged in by a few, can impose transaction costs on all players in the market without commensurate benefit. Typically, this approach ignores the fact that most members of society did not indulge in misconduct, and therefore need not be burdened with heavy costs without commensurate benefits.

The obligation to present new regulatory measures on empirical data along with a cost-benefits analysis is non-existent in the Indian regulatory environment. The Financial Sector Legislative Reform Commission that drafted the Indian Financial Code (proposed as the law that would govern law-making in the financial sector) has proposed that it should be mandatory for financial sector regulators to conduct cost-benefit studies and place it for public comment along with the draft of regulations they propose to introduce. Such an approach is critical to ensure that the regulators do not use an AK-47 to swat a fly. Sadly, almost all of the discourse around the Indian Financial Code is centred on the perceived politics between the Government of India and the Reserve Bank of India, sidelining from the narrative, important issues such as how to make laws.

The running of business is a social service. Profit is a legitimate social reward and incentive for serving society.

Coming back the social stigma that money attracts in India, the subject of gurus presiding over wealthy empires is a prickly and sensitive subject. That commercial success is itself seen as stigmatizing in India, is borne out by some of the tweets that my column attracted from devotees of gurus who assumed (either without reading the piece, or having read it with a certain tinted mindset) that I had made a value judgement opposed to theirs.

One fellow even brought in the Pope and nationalism into the picture, suggesting that there was an element of the identity of religion and nationhood embedded in the narrative.

Another thought I was unfairly grudging of the gurus' capacity to attract better human resources, also suggesting that the gurus did not use advertising.

Some wrote to me privately, stating that I must visit the Art of Living ashram so that I could change my perspective--even when I had expressed no value judgement on their work. On the constructive side, some wrote to me about the need to now work on solutions to make the conduct of business in India easier without having to become a "guru". Indeed, some others wrote to me that I had primarily looked at the business environment for listed companies, and that businesspeople in the e-commerce world too get worshipped despite running loss-making businesses which are somehow valued at spectacular premia; these people, they argued, are the real gurus. That would be a subject for another column!

[People] get offended even when their gurus are complimented for being successful in business-- for their unalloyed happiness from their gurus feels tainted...

The running of business is a social service. Profit is a legitimate social reward and incentive for serving society. What needs to be overcome is the stigma attached to being a businessperson and to profits. The negative perception towards profits and businesses is a symptom of the failure of business leadership. Rooted in that soil is the success of gurus, whose followers disclaim the conduct of business. In that stigmatizing mindset lie the insecurities of those who get offended even when their gurus are complimented for being successful in the business component of their lives-- for their unalloyed happiness from their gurus feels besmirched and tainted by the sheer reference to money.

Tweets @SomasekharS

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