Sunday, 24 August 2014

India's most admired company

Which is India's most admired company ?  The results of Fortune's 2014 survey released recently, reveals a surprising name at the top. It is ITC.

For those unfamiliar with Indian business, ITC is primarily a cigarette company. In the good old days, it stood for Imperial Tobacco Company. Today it runs its cigarette business quietly. It has diversified into a conglomerate - Hotels and Consumer Goods being the most visible elements of its business. It does a lot of good work, especially in the agricultural sector. Its work with farmers in various parts of the country is legendary. Its has a great management team and wonderful strengths. It has been there for decades and has been a proven success over a long period of time. Growth in revenues and market capitalisation over the years has been outstanding. Yet, and yet, there must be some feeling of unease of it being the most admired company. It sells cigarettes and still makes most of its money from cigarettes.

Is that right ? ITC deserves the award on most counts - growth, profitability, value creation, quality of management, social work, etc etc. But it fails a fundamental litmus test. A cigarette maker cannot be the most admired company, in this blogger's humble view, no matter what.

The results also show where the priorities and values of business people are. The ranking is based on a survey of essentially business people. I am sure it was a very scientifically done survey and a number of parameters were covered. But the corporate world does not get it, when it comes to how the rest of the world sees everything. Do this survey amongst non business folks and it is highly unlikely that ITC would come out as the most admired company. If the corporate world continues to run by its own set of values, and is not sensitive to the outside world, it can only lead to general perception that companies are exclusively concerned with money and are of dubious morals.

This blogger does not smoke, but is actually a defender of the choice of adults to do so or not. I have no problem with ITC selling cigarettes and making lots of money from it. It serves a consumer need and as long as consenting adults choose to smoke out of their own free will, I have no problems with it. There are lots of addictions in the world which are harmful to health and it is not anybody's business to be preventing others from doing what they might themselves not choose to do. So ITC's success in the cigarette business is something I won't object to, and even applaud. But that doesn't make it a fit candidate for the most admired company in the land.

ITC has been hovering in the top five of this list for many a year. But even Yogi Deveshwar, the outstanding Chairman of ITC, I suspect, would rather wish it was not at the top.

Incidentally there isn't an IT company in the top five. The top five has four companies that have each been around for nearly hundred years  - ITC itself, Larsen & Toubro, Hindustan Unilever and State Bank of India. Only Maruti Suzuki is a relative youngster at 40 years old !! Isn't that interesting ?


Venkat said...

My vote for L&T. thier business contributed lot to development of nation and society. Innovation in complex & non-attractive areas like water, effluent, tunneling, space science, power plant, nuclear energy, green energy etc.

Sriram Khé said...

I am excited for my old employer!

A long, long ago, perhaps about this time of the year in 1986, I worked for Adyar Gate Hotel, which by then had become a part of the ITC operations.  (I hope my memory recall is correct. If not, well, sue me!) Not for long, however--I lasted only three weeks and could not wait to run away from that.  Not because of the tobacco issue ...

Ah, yes, the ethics of running a profitable respected business that makes money from selling cigarettes, or alcohol, or bombs, or ... As an old friend from my California days liked to joke, "business ethics" is an oxymoron! ;)
Do I have an awesome, awesome movie from a few years ago to recommend in this context: Thank you for smoking

Anonymous said...

Agree -a company that produces cigarettes being on top makes me uneasy too!!
I am not surprised that there are no IT companies in the top 5 - sadly they are unable to create a lasting brand impression - it is more money making, hire,fire but to build everlasting brands that is respected.. they have a long way to go!!

My vote goes for L & T - a part of Nation building !!

Ramesh said...

@Venkat - L&T came second. One weakness of it is that it is way too dependent on one man.

@Sriram - You worked for the most admired company for THREE weeks. I am in splits imagining you in a suit and welcoming guests :)

@Shy - Both you and Venkat favour L&T precisely because its products are considered "good". That's how most of the population will see it. That business folks don't see it is precisely my point. Your point about IT companies is also the general perception. Sad, isn't it.

Prats said...

I am in disagreement with you on this. Why can't be ITC a most admired company. Just because they sell tobacco products? That is just the hypocrisy of the society where they want a company to exist and satisfy their need while tagging it an evil at the same time.

ITC is an admirable company for all the reasons you listed below and in addition to that they do not push their product by surrogate ads teen focused ads.

There are a lot of products which are not best for human health but then there is a demand and a free market, an admirable company is the one which is fair in the business to the society & it's stakeholders irrespective of the business it is in.

Ramesh said...

@Prats - I see your point of view Prats. Respect it. But, as Venkat and Shy have noted, can you divorce the image of the company as one to be admired, from the type of product it sells ? I think not, but your opinion is valid too, though debatable !!

The Million Miler said...

Long long ago, as a fresh engineer, L&T was the holy grail and I did the unthinkable of rejecting a job offer from them! In the 80s you never rejected a job offer, there were very few jobs ... that's another story for you Ramesh. I went to get some more education and had to toss up between joining ITC and Unilever The exsmoker in me almost pushed me into it. A bit of pressure from family (cigarette company does not go well with the tambhram image!) Glad to know that three of the five in the list crossed my path! And as any Indian opening a bank account for the first time in the 80s, it was SBI Guindy College branch where I had my first bank account!

Ramesh said...

@Kiwi - Then, you have to be the most admired man :):)

Anonymous said...

interesting blog....Im not a smoker and dont like smoking as it is bad for health.... that said, it is a legal product so should ITC be judged for what it sells (all leagal services) rather than how it goes about its business..... for example...mining is legal, but it too generates -ve side effects..... judgement then become a 'slippery slope' I think !!!

Cheers from Down Under

Ramesh said...

@ Trevor - Understand your position. Yes, its legal, but I am increasingly coming to the view that being legal alone is not enough for companies, just as it is not enough for each of us as members of a society. There is some gene that also demands "being good". Yes, I can see the slippery slope, but .......

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