Forthcoming Economic Awakening…

Once when Brezhnev was taking his mother around his castle, showing off his cars and swimming pool, his mother asked him “Son, what if the Reds came back?”

Or so goes a story. If you think there have been excesses in the American economy, please re-think.

Top executives at Bear Stearns, Lehman Brothers, AIG (which put client’s premium money into aircraft leasing!) and other financial giants received hundreds of millions of dollars in compensation (as salary, bonus, esop, etc.) just before their firms went to the Fed with a begging bowl!

Many people find this terrible and shameful. Galling as an American would say. But the excessive and unwarranted compensation at Bear Stearns and Lehman doesn’t bother me, personally.


Simply because I do not own any equity share in any of these companies!

However, unfortunately, we all have a stake in the future of the U.S. economy as much as we have in the Indian economy.

What about the Indian companies in which many of us have a stake? Do we have any idea of the kind of stunningly stupid decisions that they have taken in the past?

You need to be in a particular company to get a closer picture. Satyam deal will look like a picnic. Corporate governance, my foot!

First started this “mind-share”, and “market-share” game. So pharma companies, FMCG companies and public sector companies were raided for people. Then the salaries were raised from Rs. 2 lakhs to Rs. 10 lakhs. Then regional managers were being hired for Rs. 40 lakhs. This meant national level positions went for Rs. 80 Lakhs. CEOs were hired first for Rs. 1 crore, and then for US $ 1 million.

Strategies were copied – branches were opened all over the place.

“How many policies have we sold in pin code 9001234? How come we do not have a branch there? So a branch was opened. A branch here and a branch there. After all Rin and Liril and Wills sold only because there were so many shops. So every where there was a railway station they opened a branch. Only problem was they extended it to local stations also. In cities like Mumbai the right side of the station was “East” and the left side of the station was “West”. So Rabale station got a “Rabale East branch” and a “Rabale West branch”.

Ha ha we have now opened 2300 branches they announced. Obviously 2300 branches meant 2300 branch managers, 23000 business development managers, 23000 sales development managers, 4600 clerical assistants, 7500 air-conditioners, 4600 tea vending machines, 6900 security guards, … was a employment exchange’s delight.

Obviously the sales had to go up proportionately. That did not happen. So “products” which looked profitable with “only” 50% upfront load and 1% asset management charges, were no longer profitable. So new products were launched with “only 40% up front load – but for the first 2 years” and the asset management fee was raised to “only” 1.94% p.a.

However, the client who had put Rs. 10,000 in a ulip in the year 2006, 2007 and 2008 found that there was only Rs. 16,000 left in the fund.

The question that the life insurance industry – and the financial services industry is asking is – did we overpay?

The answer is of course not. The client overpaid. Now he is not willing to. That is all.

Related Articles:

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Leave a Reply

This blog is kept spam free by WP-SpamFree.