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August 2008 Edition

 

 

Rahul Bajaj says the customer comes first

Civil Society News
New Delhi

For years together, Bajaj Auto had a monopoly on the Indian market and produced polluting, clumsily shaped two-wheelers based on outdated technology. People had to join long waiting lists to own these ugly blobs of metal. Such was the choice before the hapless Indian consumer that the Bajaj scooter would even be given in dowry! Liberalisation has changed all that.  Bajaj Auto can no longer afford to be complacent because competition has loosened its stranglehold.

Even more significant is the kind of evolution that has taken place in the leadership of the company. Rahul Bajaj, chairman of Bajaj Auto and one of India’s most candid industrialists, admits that finally consumers force companies to improve and deliver better products. As the bar goes up so does the standard of products because a company that doesn’t provide quality products and services at an affordable price does not have a reason to exist. Bajaj should know. His company has been forced to innovate with design and technology and upgrade its vehicles several times over what they were 15 years ago. 

In a typically freewheeling interview to Civil Society in a deserted dining room of the India International Centre (IIC), with the odd waiter stretched out on the floor in a post- prandial stupor, Bajaj, now 75 but as always full of energy, spelt out what he considers to be responsible corporate behaviour.    

How should companies define their social obligations?

Like most questions this can be answered in many ways. You ask Narayana Murthy of Infosys and he would say something.  You ask Venu Srinivasan of TVS and he would say another thing and you ask me and I would say something else. So, there may be many views. But I would say there are four steps that a company, irrespective of size, should be careful about. Though I do concede that the bigger and more profitable the company the greater its responsibility.

The first step is provision of good quality products and services to your customers at a reasonable price. To me the basic justification of  the existence of a company  is not to do charity, not to make money, it is not to provide employment: it is to satisfactorily meet the needs of its customers. The customer may be for a banking service or a motorcycle as in my case. You too as Civil Society have to meet the needs of your customer, which is your reader. If you don’t give customers quality or if you charge them exorbitant prices in times of short supply as it used to be in times of socialism, you cannot survive.

To talk of corporate social responsibility (CSR) without this first provision being taken care of is hypocrisy of the highest order. Quality goods at the least possible price: that is taken for granted. Second is corporate governance. In fact no one heard of corporate governance in India till 1995-96. CII formed a task force under my chairmanship at that time. That was the first clear cut report on good corporate governance, which came out in 1998 or thereabout.

But then who was going to follow it? So I got after DR Mehta who was at time the chairman of SEBI to make it essential that a company which is listed meet the requirements of disclosure, transparency, accountability, independent directors and auditors and so on.
Most of the corporate governance requirements have now come in the in the companies act and become mandatory.

The third point in social obligation is CSR, which today is not mandatory. It continues to be debated: If I’m to maximize shareholder value as board member or chairman or CEO of a company does it help, come in the way or is it neutral? Till 10 years ago, the majority of the top 100 companies in the world said ‘no’ to CSR.  The majority now, partly because CSR is fashionable, say ‘yes, it helps us, it is in our enlightened self-interest’. There are a lot of people even now, though in the minority, who have doubts. So, each chairman, each CEO has his view.

But CSR must flow from good governance and accountability. A company must provide transparency, accountability, disclosure, 50 per cent of the board should be independent. Now I can put a tick mark in the box and say done. The independent director is not a full time guy, doesn’t get paid, is not my relative. In reality is he independent?

There are independent directors getting very fat fees.

Exactly. Even in a most corporate governance savvy company like Infosys -- and Narayana Murthy and Nandan Nilekani are good friends of mine and I hold their company in high esteem, it is way ahead of most other companies -they pay their board members like mad. There are people who have told me ‘we look at Narayana Murthy’s face before we open our mouths’ -- of course this was five years ago,

So, there is not much difference between Reliance and Infosys in such things?

Yeah, but, but, but… Mukesh (Ambani) is like a younger brother to me.

So, what then is corporate social responsibility?

In Baja Auto it is to make an environmentally clean vehicle in an environmentally clean manner. Doing so helps the company and respects the environment. CSR is also training people to be safe drivers. It could be working in the area of HIV/AIDS. In India HIV/AIDS may not be such an important issue for corporates. But in Africa it is a big issue.

And the fourth point?

The fourth is philanthropy. Charity is a bad word. To the extent that there are people who doubt whether CSR helps add to shareholder value, philanthropy can probably be questioned more. Donating here, donating there. Again it has to be kept in mind that if you don’t do the first three and then you do charity you are the worst hypocrite of the lot. It is like going to the temple in the evening and the whole day cheating.

CSR as it is practised here or elsewhere in the world seems like so much window-dressing. What can make it more meaningful?

If you are in a society where HIV/AIDS is very prevalent and from which you recruit people, then to do things to prevent it is in my opinion is in your interest and also good CSR. Similarly environmentally clean vehicles. India may not be that much conscious as yet, but in many other markets there are people who would prefer to buy a clean vehicle. In America from foodstuff to other products, everything is mentioned. And there people who are very conscious who will not buy a product that is not clean.

So, when you say it doesn’t happen, I don’t fully share that view except to the extent that much more needs to be done. But for that, and I’m not passing the buck, public opinion has to be created. That you have to do.

There is a need to upgrade technology in emerging markets like ours. What is it that governments can do to help companies?

It is a long story. America has still not signed the Kyoto Protocol saying India and China are to blame for the increase in greenhouse gases. That is utter crap. I told Al Gore this on his face. Of course we are doing things, but per capita emissions from India will never exceed that of the West.

What is there that we can do by way of policy framework?

There are hundreds of things. But you take my industry. The vehicle being produced 15 years ago and today is seven times better. What more do you expect us to do. If other companies are not doing it you ask them.

And you feel this has been possible because of the policy changes that we have seen?

No, no, not policy. This is us.  Except, if I have to give credit elsewhere, I would say the bar is being raised. Cleaner and cleaner vehicles. If they didn’t raise the bar at all industry would be a little lax.

Do you see a role for policy in promoting electric vehicles?

The only five electric three-wheelers running in Agra at the Taj are Bajaj three-wheelers.

The point here is that more incentives need to be given to switch to cleaner fuels.

Much more, much more needs to be done. But the government is bankrupt. We pay taxes that have to be spent on national rural employment, education, drinking water, sanitation. There is no question of the government paying anything. In such a situation incentives come from lowering taxes marginally. But it is not enough. I have a hydrogen three-wheeler in Pune built in collaboration with an America company. It is not commercial, not viable.

Why? 

Cost. Performance. Take the electric vehicle. How much charging time does it require, what is the range and what is the speed?  What is the cost of the battery? The technology is being developed at a cost of billions of dollars, but is still not available after all these years.

We have a good electric car like the Reva, but we don’t promote it.

None of them are viable, none of them are commercially saleable. Why don’t they sell commercially? Sell a million cars. They all have limitations. The electric vehicle is not an answer. The answer for the next five or 10 years, in my view, is the hybrid vehicle. This will be till the hydrogen fuel cell vehicle comes another eight to 10 years down the line.

 

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