One of the most critical determinants of a company's success is its people. This is the reason we lay a lot of emphasis on evaluating the quality of a company's management. Some important questions that you may want to ask are: Is the management maximizing value for its various stakeholders? Is the management incentivised to work in the best interests of the company? Is there a system to reward good performance and punish poor performance?
These questions gain even further significance in the context of public sector undertakings (PSU). PSUs are often subject to political interference, undue bureaucracy, rampant inefficiencies and corruption. This is why listed PSUs often trade at a significant discount to their private sector counterparts.
But there is a reason why you should be worrying even about unlisted PSUs. Many of the mismanaged PSUs are bailed out with thousands of crores of taxpayers' money. A classic case is Air India.
We recently attended a discussion by Jitender Bhargava, ex-Executive Director of Air India who has authored a controversial book calledDescent of Air India. Mr Bhargava, who has spent two decades with the national carrier, gives a shocking insider account of how a once-successful airline was systematically destroyed to serve vested interests.
Let us share with you some key highlights of the discussion that we witnessed. Firstly, it is important to understand that the airline sector is a very thin margin business. It is extremely vulnerable to adverse macroeconomic changes. As such, it is very crucial to maintain cost efficiencies and ensure optimal utilisation of capital.
One of the reasons for the highly inefficient management is the constant government interference and excessive bureaucracy. For instance, the CEO of Air India would be obliged to spend most of his time dealing with government bureaucracy. The independence of the CEO would also be often compromised. Diktats from ministers had to be followed. Moreover, the top management and the board of directors often comprised bureaucrats instead of experts and professionals. How can you have people who have no clue about the airline business be responsible for all the key decisions?
Apart from the enormous inefficiencies, the author has also alleged that Air India has been intentionally and systematically sabotaged to serve the interests of certain ministers and private carriers. Many questionable decisions such as harmful bilateral agreements, shutdown of profitable routes (later taken over by private carriers), reckless expansions, etc. pushed Air India to the brink of disaster. What is even more shocking is that people who questioned or opposed many of these bad decisions were shown the door. On the other hand, those who danced to the tunes of ministers thrived.
While prima facie the author's views appear to be genuine, the validity of the allegations is yet to be proved. If the views of the author are true, this would be yet another massive scam wherein a national asset has been destroyed and crores of public wealth looted.
Do you think Jitender Bhargava's views about Air India deserve a fair consideration or does he appear to be just a disgruntled ex-employee?
These questions gain even further significance in the context of public sector undertakings (PSU). PSUs are often subject to political interference, undue bureaucracy, rampant inefficiencies and corruption. This is why listed PSUs often trade at a significant discount to their private sector counterparts.
But there is a reason why you should be worrying even about unlisted PSUs. Many of the mismanaged PSUs are bailed out with thousands of crores of taxpayers' money. A classic case is Air India.
We recently attended a discussion by Jitender Bhargava, ex-Executive Director of Air India who has authored a controversial book calledDescent of Air India. Mr Bhargava, who has spent two decades with the national carrier, gives a shocking insider account of how a once-successful airline was systematically destroyed to serve vested interests.
Let us share with you some key highlights of the discussion that we witnessed. Firstly, it is important to understand that the airline sector is a very thin margin business. It is extremely vulnerable to adverse macroeconomic changes. As such, it is very crucial to maintain cost efficiencies and ensure optimal utilisation of capital.
One of the reasons for the highly inefficient management is the constant government interference and excessive bureaucracy. For instance, the CEO of Air India would be obliged to spend most of his time dealing with government bureaucracy. The independence of the CEO would also be often compromised. Diktats from ministers had to be followed. Moreover, the top management and the board of directors often comprised bureaucrats instead of experts and professionals. How can you have people who have no clue about the airline business be responsible for all the key decisions?
Apart from the enormous inefficiencies, the author has also alleged that Air India has been intentionally and systematically sabotaged to serve the interests of certain ministers and private carriers. Many questionable decisions such as harmful bilateral agreements, shutdown of profitable routes (later taken over by private carriers), reckless expansions, etc. pushed Air India to the brink of disaster. What is even more shocking is that people who questioned or opposed many of these bad decisions were shown the door. On the other hand, those who danced to the tunes of ministers thrived.
While prima facie the author's views appear to be genuine, the validity of the allegations is yet to be proved. If the views of the author are true, this would be yet another massive scam wherein a national asset has been destroyed and crores of public wealth looted.
Do you think Jitender Bhargava's views about Air India deserve a fair consideration or does he appear to be just a disgruntled ex-employee?
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