Friday 8 August 2014

Vitriol or journalism? The Economist's biased tirade against Mukesh Ambani

The Economist story on Reliance is a load of balderdash as is the lead editorial about the company. I don’t hold a brief for RIL, not by a long shot. But I can tell you that this story is short on facts and long on innuendos and even longer on unsubstantiated assertions.  Simply put, it is rotten journalism. Coming as it does from The Economist, which too many people view as the last word on just about anything, it is simply unacceptable.

Let me tell you where I am coming from. I am a former journalist. The last article I ever did as a mainstream reporter was a cover story on Reliance. It was a story which worried the company sick and they tried to get me off the story after they saw the questionnaire I had sent them. In the course of researching the story, I was allowed to meet just one person within the group, who, in the middle of the interview, asked me to get out of the room. With me were 3 other colleagues, one of whom had been sent to keep an eye on me, he even had the gall to fax the story to RIL for them to look it over, to suggest changes. That was the day I realized that my decision to leave journalism was the right one.

Let me also state that I do not own shares in Reliance nor have I ever held shares in Reliance.  Today I am a struggling entrepreneur. My firm does no business with Reliance. I do not know Mukesh Ambani but I must disclose that he delivered a lecture from our pulpit to honour the memory of a banker who had funded Reliance in its early days.  Let me also tell you that I was not asked by RIL to write this article though I won’t be surprised if they circulate it widely.  But I did call a friend in RIL to find out how many shareholders they have. Turns out the number is just shy of 3 million.  I suspect that most of them would take umbrage at the characterisation of Mukesh Ambani as the unloved billionaire though I am sure each of them would love his billions more.

As an entrepreneur, I can tell you that capitalism sucks. Capitalism is rotten, right down to its core. Trouble though is that communism is no better, if anything it is worse. When individual initiative is allowed to flower, is allowed to play out in its fullest in an individual’s pursuit of greed, many good things happen. But then many bad things happen too, things that one may not like or approve of.  If greed is good as I am told by all those that have funded me and those that won’t, one has to accept the reality that there will be some good and some bad.

Everything that Reliance does is in pursuit of its greed.  As does every other company which operates in a  free market. If greed is good is the mantra of enterprise, and if in the pursuit of greed, the firm seeks to get the best for itself from the government and spares no efforts to get its way, is that wrong in a competitive world. What are the limits of competitive behavior? Are the limits different for countries from different countries? US Defence Secretary Chuck Hagel is in India today to push for US defence contractors, all huge contributors to the Obama campaign. Is that not crony capitalism? Shortly after the Modi government took over, the British government sent two senior people to plead on behalf of UK defence contractors. Is that not crony capitalism? I am not going to list out every one of the instances where the magazine gives a great degree of latitude when covering excesses of western firms and western players while lambasting those in China, India and elsewhere for similar faults. The hypocrisy stinks.

I would have had no problems if the article and their edit had cogent arguments with facts to support it. But this article quotes an unnamed PE investor who is disgusted with himself for applauding Mr Ambani. I don’t know why this man had to do so, was he worried that cameras were trained on him that would monitor every move of his that he had to show his public approval even if privately he only had contempt? Nonsense. Then the articles quotes another unidentified gent, this one a banker who “spat out his contempt for that damn company”  when as a banker he should have nothing but concern for whether the company was eminently credit worthy. The article does not say if the banker has an exposure to RIL which I suspect it does. The article dignifies these two gents by calling them critics though I could read no criticism in what they had to say, the journalist clearly cannot tell between insults and criticism.

Yes, RIL is a big company. One of the few facts offered by the company is that the group accounts for 15 % of India’s exports, 4 % of its stock market value and coughs up 3 % of its tax revenues while accounting for 6% of private corporate investment in India.  Because they are big, they wield a lot of clout. With as many stakeholders as they do, they have the need and also the ability to influence policy to suit their own ends as with any company or group of a similar size anywhere in the world. The article makes no disclosures of illegal acts by Reliance but merely suggests that because the group is big and because they can get their way, they must be up to no good. I would say this is true of all big companies all over the world. Reliance does not deserve to be singled out so.

In fact, the article calls Reliance as a “how not to guide to good governance”, but none of the points made support this utterance. The journalist comments about the composition of the board of directors where Independent directors have served for more than 14 years on the average, with 3 of them old and aging and north of 80 into which the  Chairman’s wife has been inducted. An assertion is made about how the lines of responsibility are fuzzy with no facts to support the same. Nothing in the board composition was violative of the law of the day in India and to make statements like this cannot be but to make the company look bad.

The article seeks to contemptuously dismiss the ownership structure by using the word fiddly, a pejorative term, when its synonym, “complex’ would do.  What is illegal or wrong about a complex web of ownership ? If the purpose of this statement is to allege some wrongdoing, why does the magazine not say so in so many words.  The article alludes to a comment by one of the firm’s main regulators. What in heavens is  a main regulator?  RIL is a company incorporated in India over which the Registrar of Companies has oversight. The listed companies in the group come under the purview of the Securities Exchange Board of India’s purview. I can understand the journalist’s need to protect confidentiality and I have done several stories where I have attributed statements to sources who wished to be anonymous. But a regulator who wishes to be anonymous about the name of the regulator? I have never heard of this. I find this incredibly poor journalism.  If it is the taxman who wants to pierce the tax veil as I presume that the complex structure is for reasons of tax, all that they need to do is to put an excel sheet together. I am perplexed at the loaded statements. Most American companies and UK companies operating overseas have complex structures which they create for tax planning. That does not make them rogues, does it.

The article talks about how the company gets a thumbs down from foreign equity investors in India. If only the writer had done some basic research on the Bombay stock exchange website, he would have found that close to 20 % of the stock is held by foreign funds, up from 17.3% a year ago. That does not sound too much like a disapproval to me. Nor does it support the comment about foreign fund managers being wary of Reliance, why then are they holding the stock and even increasing their positions?

There is one nugget about the group that they have unearthed about how a total of $ 1.2 billion is paid to related parties, mostly family owned entities. Rightly, they have said that the board should provide oversight to ensure that the deals are at arms length.   The last thing they have unearthed as a how not to guide for good governance is a 2007 case filed against them by SEBI which continues to stay unresolved. Every company has its fair share of litigation to contend with, practices that may not be entirely kosher. But to take this and describe Reliance as a “how not to guide in corporate governance” is malicious.

The article seems to feel that there is something virtuous about the way global companies do business in sharp contrast to how Reliance operates. I don’t recall if the magazine had their knives out for the London banks who sought to cheat the global financial system by fixing LIBOR, the benchmark rate used the world over and which even a small company like mine is affected by in our dealing with local banks. I don’t recall the magazine asking for those banks to be shut down or their co conspirators to be hung from the nearest pole. Mr Ambani looks almost saintly when compared with these charlatans.

While it does not say so in so many words, the innuendo ridden article is positive about the association of the group with Marks and Spencers and with Brooks Brothers. Conveniently enough, the scandal over  how Marks and Spencers benefited from the recent horsemeat crisis does not seem to have stuck enough to make the groups association with Reliance bad. Similarly, the alliance of Reliance with scandal after scandal ridden BP seems to get tacit approval too.

As I said at the very beginning, I hold no brief for Reliance. It is just that I am aghast how an article such as this can finds its way into The Economist with no facts but only opinions that seeks to damage the reputation of Reliance and Mr Ambani.  I know that many journalists are applauding the article from the sidelines, they are happy that someone has the guts to take RIL on. They are angry that RIL took over TV 18 and they see this article as just desserts. They don’t realise that if RIL uses its newly acquired media assets to further its own narrow agenda, the quality of the offerings from their media stable will not find consumers. They have burnt their fingers once and hopefully the lessons have been learned. More than any agenda set by the Ambanis, it is the hired hands who may let them down by forcing the media to pursue what they perceive as their masters agenda.   RIL does not become evil just because they took over a media group as some would have you believe.

In sum, I would turn to the credo of the magazine which the article defies. The Economist says that it was established in 1843 “to take part in a severe contest between intelligence, which presses forward, and an unworthy timid ignorance obstructing our progress.”  Instead the author presses forward to push his editorial line through with scant regard for facts and with an ignorance, unworthy of a magazine which has carved out a position for itself so lofty. It is a sad day for journalism.


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