A trip down memory lane
— PHOTO: AP
WINDING UP: Mo Grimeh, a Managing Director who worked at Lehman Brothers for ten years, reacts as he leaves the company’s headquarters in New York City after hearing the news that the company may be forced to seek an orderly winding of its businesses.
Once big names, Enron,
WorldCom
and Arthur Anderson
had all gone into
history one after another
in double quick time early
this decade. Even as Lehman
Brothers moved to file bankruptcy
papers, the U.S. Government
has hurried to
rescue the beleaguered AIG
(American International
Group). Just a few months
ago, Washington did the same
to two big mortgage lenders
- Fannie Mae and Freddie
Mac. A short trip down memory
lane, one could find what
had happened to Bear
Stearns. History has a knack
of revisiting us. Merril Lynch
changes hands. And, the market
is constantly agog with
rumours of one big company
or the other going on the auction
block.
Common factor
Often, one wonders why
such big names encounter
sudden deaths. One crisis or
the other is blamed for their
demise. The reason, however,
lies within the organisations.
A common factor in all these
`deaths' is the financial shenanigans
of the top management.
These are very well chronicled
by investigative authorities.
The latest crisis has
blamed it on the sub-prime
woes in the U.S. Basically, the
crisis, it is argued, is triggered
by unbridled distribution of
housing mortgages to buyers
with inadequate credit-worthiness.
Traditionally, banks
gave home loans directly to
customers.
In modern banking, the
banks have sort of become intermediaries,
creating a chain
of upstream and downstream
links in the process. Not surprisingly,
the impact of any
adverse fall-out reverberates
across the entire chain triggering
across-the-board disturbances.
This appears very
simple. It is, however, very
complicated to comprehend.
Competition
All these are no small
names. Yet, they fail miserably.
Why? More often than
not, companies in India are
tutored on the need to buck
up and follow the global standards
and practices.
Analysts and consultants
are aplenty - both from within
and outside - who never
skirt an opportunity to deride
the Indian systems and practices.
They always push for
adopting the global - read
U.S. - practices as benchmarks.
If they have secure
systems and standards in
place, how could they go
bust? An easy answer is well
nigh difficult. Competition,
no doubt, has done huge good
to the economy at large. In
the same width, it has also set
off a previously unheard of
kind rush to win a piece of the
valet of a consumer. In the
dog-eat-dog world of competition,
corporates/banks
across the world have
stooped to low levels to win
business and boost margins.
As they rush in to write more
business, the rules of the
game are flouted. And, they
are left ruing in the end.
As in life, in business too,
practices should be in sync
with preaching.
The problem lies with
those who administer these
practices in their respective
organisations. Perhaps, the
individual greed has combined
with the organisational
greed to plot the downfall of
these big names. All these are
more to do with pressures on
the modern day managers to
make quick bucks. And, these
pressures are accentuated by
the taxing demands from various
stakeholders. And, the
need of the hour is fairness in
conducting business.
K. T. JAGANNATHAN
Printer friendly
page
Send this article to Friends by
E-Mail
Business
