IN SEARCH OF A MODEL OF EFFECTIVE MANAGEMENT, A RUSSIAN ENTREPRENEUR TALKS ABOUT THE "INDIAN WAY" OF ECONOMIC DEVELOPMENT

A. V. NOVOSELOV

Deputy General Director of SCM Holding for Corporate Development (Yekaterinburg)

Our holding's interest in the international experience of corporate governance is not theoretical,but purely practical.

About 6 years ago, the company's management decided to systematically introduce corporate governance methods at all enterprises included in the holding. The difficulty was that they all belonged to different industries and were at different levels of readiness to introduce new organizational and managerial forms.

We immediately had to face two opinions regarding the construction of a corporate governance system.

First, it is necessary to follow in detail and scrupulously the Western analogues (mainly Anglo-Saxon) of the management model and the recommendations set out in the documents of the Federal Securities Commission (FCSM). At that time, there was already a Russian Code of corporate Conduct, prepared by this commission on the basis of generalizing Western experience.

The second opinion, on the contrary, suggested that Western management technologies in Russia are not organic, and you need to look for your own path, as they did in some Eastern countries. But if the theoretical basis for the first approach is easily accessible, well-organized, and rich in practical examples, then the search for your own model is thorny, difficult, and does not guarantee success.

Nevertheless, we reasoned that we are interested not only in the experience of the United States and European countries where the market economy has existed for more than 300 years, but primarily in the experience of those countries that are either at the stage of market development, like Russia, or slightly ahead of us. Their chosen path is characterized as a "transition economy"or a " transitive economy".

Of particular interest, we believe, is the experience of the BRIC countries (Brazil, Russia, India and China).

The high rates of their economic development attract the attention of not only investors, but also numerous business consultants, who also seek to gain a foothold in this promising market. The introduction of management technologies cultivated on the experience of Western companies to the soil of countries with the richest original culture leads to a very bizarre symbiosis, generates phenomena that deserve to be described and studied. For example, India, while preserving all its centuries-old traditions (which is why it is perceived by many as a kind of" oasis " of an exotic, unique culture), shows good dynamics in its economic development.

At the beginning of the twenty-first century, India's average annual GDP growth reached 7.5%, although in the first three decades after the country's independence it did not exceed 1.25%.1 The recently closed Indian economy has attracted tens of billions of dollars ' worth of foreign investment. Over the past 20 years, the share of foreign investment in the country's GDP has grown 20 times!2 In India, such global companies as Mittal Steel, Tata Group, Reliance Industries, etc. have appeared and are rapidly developing. The country's success in the IT (information technology) industry is widely known. The Indian stock market has become one of the most capacious in Asia. Almost 5,000 companies were listed on the Bombay Stock Exchange.3
It was extremely useful for our company to train our representative at a seminar on corporate governance, which the American business school Wharton held in March 2009 in India for Indian citizens. First of all, we were not interested in what Western gurus teach their Indian listeners - their set of recommendations is quite standard. The main thing was to take advantage of the opportunity to find out how Indian traditions relate to the innovations introduced from America and Europe in the management practice of national companies.

In the group of 39 people, 38 were Indian and one Russian-the author of these lines. The situation is unusual, but convenient for" enabled " surveillance. A list of questions that we would like to get answers to during the course of training, for which the interviewing method was chosen, was compiled in advance. The questions related both directly to corporate governance (formation of the board of directors, the system of remuneration of managers and control over the implementation of decisions, evaluation of management results in general), and the role of traditions in the economic life of India.

As it turned out, the respondents represented a very impressive segment of the Indian business world that focuses on preserving traditional business practices.

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LIKE ONE BIG FAMILY...

In their opinion, the understanding of business is based on family traditions.

The company is one big family. And if the company is large, then its management is certainly, and in the truest sense of the word, a family, i.e. an association of blood relatives. Most companies are controlled by family clans, clans, and large families. The organizational mechanism for making the most important decisions (similar to the general meeting of shareholders) is the family council, which meets at least twice a month.

The principles of its formation and decision-making mechanisms are interesting. The board includes all relatives involved in business management, regardless of age and work experience. The council is managed by a family representative, whose position is inherited. As a rule, this is the most experienced member of it and always at a solid age. The respondents could not recall any of them under the age of 60. Decisions are made after listening to the positions of all those present, by voting. But in any case , the head of the family, who in the Russian transcription can be called an "elder", has the decisive vote. It not only resolves disputes between relatives, but also represents the company in the external environment. It is the family council that is the main management body of the company. There is usually a board of directors, but it performs mainly service functions, and its composition is controlled by the family.

To the question: "Can we say that individualism is replacing collectivism in the life of society?" - the absolute majority of respondents answered in the negative: "No, everyone has always lived as families, together with their parents, grandparents and grandparents." The words "family position", "family opinion" are very significant, the family decides almost everything. Among the respondents was a businessman whose son moved to the United States and married an American woman without parental approval. According to him, at the general meeting of the company (read - family), he was deprived not only of his inheritance, but also of the right to appear in the family.

The interest of all family members in improving business efficiency is fueled by participation in the distribution of the company's profits. At the family council, a decision is made on the size of the coefficient of personal participation of a family member in the company's affairs, his personal contribution to the success or failure of the common cause is evaluated, and the amount of his remuneration is determined. This forces you to delve into the essence of business processes, improve the management of assigned areas, and be aware of the overall situation in the company. The final decision on the amount of remuneration is made by the head of the family, and it is usually not disputed. Self-realization on the side or employment in other areas of activity is not welcome and is fraught with loss of a share in the business, as well as disinheritance.

In the process of forming the board of directors, they also mainly focus on family values. With an average board size of 8-10 people, all of them will be representatives or friends of the controlling family. None of the boards described by the respondents had more than 2 directors who were not related to the family. However, they cannot be called fully independent either, as they are usually foreigners-representatives of an external investor. As soon as the company's need for access to external sources of capital disappears, the presence of independent directors on the board of directors also makes no sense - its structure returns to the traditional family form.

Recently, in the West, much attention has been paid to the gender aspect in the formation of the board of directors. In India, the share of women in such councils usually does not exceed 5%, but, according to the businesswomen themselves, their opinion is not very listened to...

According to the law, the rotation of members of the Board of directors should take place every 2 years, but in practice they hold their positions for 10 years or more. In this way, the risks of instability, disclaimers of responsibility for their obligations, as well as the risks of information leakage are minimized.

WITHOUT UNNECESSARY FORMALITIES...

The influence of family values also extends to the relationship of owners with the executive management of companies. Answering questions: "How formalized are relations between owners and top managers, including with the CEO?" and " Are there clearly defined contracts?" - respondents said that the situation is significantly different for public and private companies. While in public companies, the contract with the CEO is legally binding, requires approval from the board of directors and is transparent to shareholders, in family businesses they usually adhere to "gentlemen's agreements". The representative of Mukurugroup Ltd, with whom we spoke, said that for him all the CEOs in his businesses are like relatives, and no contract should be concluded with them.

There are differences in the remuneration of top managers in companies with the participation of foreign investors (which is a minority) and in companies consisting of traditional family businesses. The former practice a "typical" Western system of remuneration, which is divided into long-term, determined by the concluded contract (usually for 3 years), and short-term parts; the latter is essentially a monthly or quarterly salary. In family companies, the principles of remuneration are usually unique, each company has its own, but usually "no frills". As one of the interviewees answered, " ... since information about the CEO's remuneration is open and approved by the board of directors, you don't go around much..."

As a rule, respondents left the question about the control system at enterprises unanswered. Thus, they do not consider it necessary to conduct an external audit by independent audit companies, if this is not required by law. What is the cause of ta-

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whether it was a desire to avoid additional expenses or an unwillingness to disclose information about the business, we could not find out.

Although there are many corporations with state-of-the-art management in India today, and there is even a certain fashion for open public joint stock companies, maintaining family control over the business is still a priority for many firms. The realization that professional management is necessary to improve the quality of management (and, consequently, increase the profitability of the company) is quite rare among them. Hence the widespread reluctance to use external sources of growth: loans, bank loans, and raising capital from" third-party " investors. Often, the possibility of daily and meticulous control of the company's activities is sacrificed to its dynamic development. It is also significant that most Indian companies focus mainly on the domestic capital market. Shares of joint ventures with significant foreign participation are usually placed abroad.

TRUST IN THE AUTHORITIES IS HIGH, BUT NOT ABSOLUTE

During the survey, respondents were asked: "How would you describe the level of trust in the authorities in society?"

The answers seem to clearly indicate that the level of such trust is high. It was almost unanimously noted that the Government copes with its main tasks - to ensure order and create favorable working conditions. It is significant that there is no outflow of capital from the country in India, which, of course, indicates the confidence of Indians in the state and in their economic system. But then what about the responses of the same respondents who noted a high level of corruption in the country? And both at the national and regional levels.

The respondents were asked to build a hierarchy of values that they adhere to. The result is the following scale: 1) family values, 2) religious norms, 3) company interests, 4) regional interests, 5) national and state interests. The following question was also asked: "Are the norms and rules recorded in the documents more important for you, or the idea of good and evil that reflect your worldview?" I believe that it is obvious to everyone that moral and ethical norms prevail over the formal ones set out in the documents.

Analyzing all of the above, it is impossible not to come to the conclusion: it is not easy for a person with a Russian mentality (as, indeed, with an American or European one) to conduct business in India - in most cases, you can't do without an "interpreter" - a highly qualified "translator". It is not without interest that the Indians strongly resist the penetration of foreign specialists and entrepreneurs into their national companies. But they never oppose or even welcome foreign investment in their economy.

A special place was given to questions about national peculiarities that promote or hinder entrepreneurial activity. Among the national traits that contribute to economic prosperity, respondents attributed, first of all, the peculiarities of thinking in mathematics, programming, finance and accounting. It was also noted that "Indians think quickly and voluminously."

Indians, like Russians, are willing to talk about their shortcomings. Among the latter, most often called: "inability to implement the developed models", " can not do something carefully, for a long time and consistently." One of the main reasons for failures and not moving forward quickly enough was called too much diversity of religions among ethnic groups and regional communities. Remnants of the caste system were also cited by many as an obstacle to the country's more dynamic development.

But the majority of respondents have a vague idea of the features of the "Indian way" in the economy. Most often, it was said that it should not be "pure capitalism", as in America, or "market socialism", as in China, but "something in the middle..."

PRESERVING TRADITIONS IS A PREREQUISITE FOR SUCCESSFUL DEVELOPMENT OF THE COUNTRY

This is not to say that the answers received were completely unexpected for us.

It is known from history that many traditions of modern Indian entrepreneurship were laid down in ancient times. In the middle of the first millennium BC, there were already proto - corporate associations in the country-unions of Shreni artisans. These professional corporations were characterized by a high level of self-government, as well as a status somewhat similar to that of a modern legal entity.4
Of course, the survey conducted by the author does not give an absolutely exhaustive and objective picture, since the choice of respondents was generally random, and not everyone was willing to make contact.

But some conclusions can be drawn. And the main one is that under certain circumstances, a traditional, even somewhat archaic, way of life can perfectly get along within the same company with the latest management technologies. This "symbiosis" is often beneficial to the business, since tradition and innovation are generally in a dynamic unity, and their optimal combination is precisely what ensures the most dynamic and highly efficient management.

1 OECD Economic Survey of India 2007 // Сайт OECD - http://www.oecd.org/data-jecd/17/52/39452196.pdf

2 Ibidem.

3 Bombey Stock Exchange Key Statistics / / Website of the Bombay Stock Exchange -http://www.bseindia.com/about/st_key/list_ cap raised.asp

4 See: Vikramaditya Khanna. The Economic History of the Corporate in Ancient India - http://www/law.harvard.edu/pro-grams/olin_center/corporate_governance/papers/2006sp-Spe akers_Paper03_02 - 21_Khan-na.pdf

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