To hell with the markets

It sounds like a mandatory social responsibility order on profit making public sector enterprises (PSEs) in Gujarat. Below is the brief from Times of India:

In a controversial order, the Gujarat government has asked all profit-making public sector enterprises (PSEs) in the state to contribute up to 30% of their annual profit before tax to Gujarat Socio-Economic Development Society (GSEDS), set up to support weaker sections of society.

What adds a twist to the story is that many of the companies are listed in the country’s leading stock exchanges. How would the investors react? Well, the PSEs have lost hundreds of millions in market valuation:

‘‘It’s a retrograde step from the capital market point of view. A better way to implement CSR is to ask PSEs to increase the dividend payouts so that the Gujarat government receives higher sum to donate to any society of its choice,’’ said V K Sharma, the head of Anagram Securities.

To hell with the markets? Maybe not. It’s a little bit of an irony that Gujarat is arguably one of the most market-friendly states in the country with strong captialist idealogies. In fact, Mr. Modi recently won the state elections running on a platform of economic growth and prosperity!

SKS getting closer to an IPO?

The Economic Times reports that SKS is planning to infuse Rs. 130 crores additional equity into the company to support its aggressive expansion plans [via Microcapital]. Here is the quote from the story:

“Our investors will infuse Rs 130 crore later this year on a pro-rata basis. We may plan to induct a new investor since we’ll be needing more capital next year and it cannot be generated internally. At this stage, it is not clear how much stake we will offload. We will also not exclude the possibility of a public issue,” Vikram Akula, founder and CEO, SKS Microfinance told ET

If SKS goes public, it will become the first Indian microfinance lender to do so.

Note: One of the TC-I editors had previously discussed the implications of SKS going public in this popular op-ed piece.

Social Responsbility in IIMA’s curriculum?

Its about time the country’s top business school started incorporating social responsibility into its a curriculum (I would think its probably running late by a few years). But, Indian Institute of Management, Ahmedabad (IIMA) is going through a once in a decade syllabus revision process and one of changes include a asking students to take up a two-week internship with social organizations [via ET]:

In order to highlight the need for coporates’ social responsibility, the committee feels that students be given an option to join a social organisation for internship in their first year. However, students not interested in joining social organisations may opt for writing a case study as an option.

IIMA should learn from other leading business schools in India and abroad which have done a lot more to integrate social responsibility into their curriculum. For instance, SPJIMR, the Mumbai based business school has mainstreamed a fairly well recieved internship program where students work with NGOs and social ventures during a part of thier summer. The key is to make social responsibility a core part of the discourse, not just an additional requirement forced upon the students.

Taking people to jobs vs. Taking jobs to people

Last Sunday’s Economic Times carried a opinion piece titled “Ending the Ovarian Lottery” by Manish Sabharwal, the Chairman of TeamLease Services, the country’s largest temp staffing agency. In the op-ed, he calls for a national policy on making India’s labor markets more inclusive to address the inequalities created by the ovarian lottery (a persons earnings potential is still limited by where he or she is born – in India’s case mainly urban vs. rural):

Inequality is a tragedy. But I couldn’t agree more with economist Arvind Panagariya who in his brilliant recent economic history of India writes that targeting the five kinds of inequality (income distribution, regional disparities, urban versus rural, unorganised versus organised employment, skilled versus unskilled) is the weaker policy prescription.

A more effective policy response would be making labour markets more inclusive and improving the capacity of labour market outsiders (less educated, less skilled, first-time job seekers, people from small towns, women, retired people, etc) to take advantage of India’s new tryst with destiny.

In the short run we can’t take jobs to people; we need to take people to jobs. This means creating the processes, institutions and framework for labour migration. This is sacrilegious to the many who believe that keeping people in villages is a policy imperative because of urban decay and quality of life.

I strongly recommend reading the entire piece. Quite powerful words, especially coming from head of a company which is slated to become the country’s largest private employer. I presume TeamLease’s model is strongly dependent on sourcing talent from outside the metro’s – which is also reflected on Manish’s stand on taking people to jobs vs. taking jobs to people. While I agree with his argument that keeping people in villages is unrealistic and unfair, at the same time, the expansion of India’s few largest cities is clearly unsustainable both in the short and the long run. The solution might be to focus on the next layer of cities, which can act as local economic engines and spread the focus away from the big metros.

ISB taking the lead in promoting Social Entrepreneurship

The Economic Times reports today that IT firm Helios and Matheson had tied up with the Indian School of Business to float a venture fund supporting social entrepreneurs:

The company will be leveraging on its association with ISB to select and study the feasibility of various entrepreneurship ideas. For instance, it is participating in the annual global social venture competition at ISB. “This year, 12 ideas are being floated by B-school students from various countries. This could be a good platform for us to meet the budding social entrepreneurs across the world as our focus is not limited to India.

Not long ago,, Omidyar Network and Soros Economic Development Fund teamed up to create a SME venture fund to be housed within ISB.