December 9, 2012
I am a private equity investor and what I find when I look at my portfolio is that the most successful CEOs are dishonest. Whenever they have to make a tradeoff between doing the right thing and making money by choosing a dubious way, they go for the latter. Does Lakshmi favour the dubious?
December 9, 2012
I am a private equity investor and what I find when I look at my portfolio is that the most successful CEOs are dishonest. Whenever they have to make a tradeoff between doing the right thing and making money by choosing a dubious way, they go for the latter. Does Lakshmi favour the dubious?
A CEO is a professional. Why is he hired: to be honest or increase the wealth of the shareholder? The ideal answer is: increase wealth by honest means. But given a choice, what does the shareholder want?
What do you want as investor? Honesty or profits? Will you reward a CEO for sacrificing profits for the sake of ethics? Will you hold award ceremonies for CEOs who failed because they chose to be honest? Will you or your funders return wealth ten years hence if it is proven that wealth generated today was done so by unethical means?
We reward success and by success we mean a positive balance sheet. We celebrate winners and by winners we mean those who generated wealth. If the profits do not come, the CEO will not be given his bonus. If he claims he could not do so because he had to be honest, he will be lambasted for not being 'innovative'.
Should the CEO be caught doing the wrong thing, the shareholder will drop him like a hot potato; claim 'limited liability' while the CEO is taken to courts. The modern institutional model allows shareholders to enjoy the rewards of the market while the CEO becomes the fall guy. Before judging a CEO so harshly do appreciate the context he resides in.
Lakshmi does not different between saint and sinner. A bowl of rice will satisfy the hunger of a holy man as well as the hunger of a murderer, cheat or thief. A glass of water will quench everyone's thirst, disregarding their location in the moral and ethical hierarchy of society. In the epics, Lakshmi resides with Ram and Ravan, Krishna and Jarasandha. The difference is that Ravan and Jarasandha grab her while Ram and Krishna attract her. Modern management, based on scientific principles, does not have the wherewithal to differentiate between the two sets of winners.
Lakshmi has two forms: Bhoo-devi who represents natural wealth and Shri-devi who represents cultural wealth. Natural wealth is available to whoever gets to it first. The strongest lion, the fastest wolf, the smartest toad gets the food. Food is the target or 'laksh'. From laksh comes Lakshmi. The small plant cannot complain when the branches of the big tree blocks the stream of sunlight. Nature is the ultimate meritocracy. No one is a favorite. If you are stronger or smarter, you have a right to Lakshmi.
But things change when it comes to Shri-devi. Suddenly in the human world, words like honesty, morality and ethics take over. These are creations by man, for man, of man. We create rules. Those who break these rules are considered unethical and immoral. But whose rules are we talking about? The rules created by government are very different from the rules of the shareholder. The CEO has to negotiate between these two sets of rules and his own set of rules, and the rules of the company.
Courtesy: ET
