The Hindu Business Line : Those at the helm need to be free of ethical smears

Story so far: Unable to digest the news of the killer blaze that vaporised the lives of so many innocent children, I stole off for a walk down the bazaar. There, I am struck by advertisements that scream of sale at hefty discounts. I wonder if such a practice makes commercial sense.

Episode 87

Last week, I had wrapped up with two questions: "One, what do we do to avoid major mishaps in schools? Two, does it make commercial sense to give such hefty discounts that consumers start worrying about quality?" For both, there are responses.

"Hello Swati, I think it makes commercial sense for businessmen to offer the so-called `hefty' discounts but does not make sense for buyers as more often than not they are taken for a ride," writes Mamata Hardikar. "Most of these `mega' offers are hoax, as discounts are `up to' and that too on `selected' items — meaning, old, slow-moving stock and never the fresh or new ones. Such offers are more for attracting `shopoholics'." A good test, therefore, before venturing out to shop is to ask oneself if some sort of compulsive behaviour has taken charge of one's decision-making.

"Hefty discounts offered by manufacturers directly (as in the recent price war in the detergents segment by MNCs) only shows how big a margin they were enjoying all along," says N. Vinod Kumar, AGM of St. John Freight Systems Ltd. "Quality is certainly not affected in such cases. Similarly, hefty discounts offered by very big trading houses, such as The Chennai Silks and Pothys, also need not mean poor quality. Their biz acumen is volumes. Interesting analysis.

"Hi Swati, discounts are normally very helpful to customers, but beyond a certain limit discounts will affect the image of the company," writes Peer Muhamed, a CWA student from Kuttichall. "It will automatically reduce goodwill. The company's future will be bleak." Moral, don't stretch discount beyond a point. Madhavan Nampoothiry, a CA student from Sreevarahom, too is of a similar view. "After a particular point discount can become costly for consumers in terms of quality sacrifice," he notes.

"Dear Swati, mega discounts and big sales are to catch your attention usually during inauspicious months such as Aadi and Marghazhi, to push sales," opines M. Thanga Velu.

"Take the case of textiles and consumer goods. Every year new designs are created to attract and induce us to purchase. We also fall prey to such attractions and go for impulse purchase. So at the end of these promos, manufacturers and wholesalers reach 80-90 per cent of their target and make very good profits too. Since they will have to keep the shelves ready for next year's new varieties, they clear all old goods and resort to heavy discounts or mega sales.

"There are customers who always purchase during this period to make a killing. You can see South Indians in Kolkata purchasing lot of saris after the puja season there, to take advantage of mega discounts. When reputed manufacturers or wholesalers do the sale we are sure of good quality or at least 95 per cent quality. Another scenario is export rejections that find their way to local markets; there are expert traders who deal only with these goods, purchasing from exporters at heavy discount and selling them as quality goods at discounted prices. Many of us go for these products, purchase them in bulk and have a false sense of satisfaction that we made a huge saving in the bargain. Ultimately, it is dealers who have the last laugh." Incisive analysis.

"Main reasons for offering discounts (I don't use the word `hefty' because before that big 50 per cent one can see `up to' in smaller letters) are competition, ageing stocks, redundancy of products due to new designs, urge to increase year-end sales figure, piling up of seconds and defectives and so on," writes M. Radhakrishnan.

"Doubts about quality do not linger with the customer since discounts are offered by reputed brands, and, as regards factory seconds, customers buy knowingly. Since discounts have become the way of life, in the long run the manufacturers lose reputation if they try to push inferior quality through discount. Because of stiff competition, they use phrases such as `never before', `hefty discount' and so on. Where `up to 50 per cent discount' is offered, one can never find products of 50 per cent discount; ultimately, what one gets is 5-15 per cent discount. A genuine doubt that arises is whether the products are really sold at a discount or the prices are jacked up and then reduced to normal levels. If the seller can offer such discounts then one can imagine the margin he gets at selling at normal price." Logical doubt.

"I agree with your view," writes Kamal Anil Kapadia, a CA from Mumbai. "Since all profit/loss of companies is computed after all expenses, prices after discount do not mean that the company would be making loss! That is for sure; it would definitely cover its cost." Thus, a compromise in quality is plausible.

********

Let me move on to the other topic, gruesome in all its dimensions, the Kumbakonam tragedy. "A result of inadequate infrastructure. Giving importance to the midday meals programme has paid dividends in a negative way," writes Madhavan Nampoothiry. "Dear Swati, schools are temples of education where the future generation is nurtured to become good citizens. Can we neglect their safety?" asks Anil Kumar Pillai of Kannur. "I believe there are norms for fire safety but these are either manipulated or ignored. The minimum that schools can have is a concrete roof. When India is the second largest producer of cement in the world, and when we have civil engineers in every nook and corner of the country, we should be able to provide a better roof than thatches. Let us at least hope that a part of the 2 per cent education cess goes into ensuring safety of these kids."

Kamal Anil Kapadia also feels that after this mishap, education cess or a safety/maintenance cess is much needed.

"Hi Swati," writes Priya. "This pathetic news was even shown in our local channel here in the US. (They generally do not concentrate on worldwide news). The mishap highlights a costly mistake and it brings to light how poorly our administrative system works. Preventing such mishaps should be the strategy rather than crying over spilt milk. Here in the US it is amazing to see how the system (meaning the whole network of administration, and so on) works so efficiently. It is all about thinking ahead, planning and adhering to the rules laid.

"Apartments here are made of wood and risk of fire mishaps is higher. Preventive steps are smoke alarm, fire extinguisher in front of each apartment and fire hydrant at every street corner and it is periodically checked. Such thoughtful steps can be followed in our country too. The Fire Department should organise street shows to educate the public. Innocent victims have taught an invaluable lesson to all erring people." We can have hydrants but we would need water too.

"Dear Swati, the Kumbakonam tragedy is one of the worst we have ever come across," writes M. Thanga Velu. "But suspending government staff is not the solution; educate them to follow the rules and regulation without fearing the wrath of the local politician. But will the town planners and civic authorities be ready to allot purampokku land to educational institutions free of cost if any NGO or other voluntary organisation comes forward to construct pucca building?

"Government and other voluntary organisations must contribute liberally for constructing pucca structures for schools run solely for the benefit poor children. " Poignant message.

"Dear Swati, we have to blame our attitude towards the lives of others," writes M. Radhakrishnan in much anguish.

"We give least importance to safety measures. We don't follow traffic rules. In every possible ways the rules and regulations are floated. To explain a daily occurrence at the elevator, if only ten are allowed, one can see the eleventh and twelfth person too trying to enter the lift. One can illustrate innumerable examples like these.

"We cannot take steps in isolation to protect mishaps among kids, because the problem lies in our behaviour of not treating the life of others as precious." Valuable thoughts.

*********

This week there was a different battle to wage, not only in Parliament, where one witnessed the sorry spectacle of debate over a Minister on the run, but also during a meeting at the CA Institute branch on an analogous issue.

An otherwise routine gathering of CAs to discuss the appointment of office-bearers turned hot when one member rose to ask if there were disciplinary proceedings instituted by the ICAI against the elected representatives on the governing council. There were mutters, stares, shrugs but no clear answers.

While returning home, I asked myself if the premier accounting body had to ensure that those at its helm were free from ethical tarnishes. Send in your thoughts by Friday.

Swati_CA@hotmail.com

For archived episodes of this column click on:

http://www.thehindubusinessline.com/nic/swati/index.htm

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Tax computation for a software exporter in free trade zone

Preoccupied with a `let-out' problem

Those at the helm need to be free of ethical smears

Nine out of ten managers don't work purposefully

Strength is not just a physical attribute

Cartoon