Untying Our Wings

This excerpt from Eknath Easwaran appeared in the Spring 2006 issue of our quar­terly Blue Moun­tain journal.

“All of us have wings, though we do not sus­pect it because they are so tightly tied. We are not meant to stay on the ground and peck at crumbs of per­sonal plea­sure and profit. We are meant to soar – to give our time and love freely to every­one around us. That is the essence of spir­i­tual growth, and the whole pur­pose of med­i­ta­tion and the other skills of spir­i­tual liv­ing is to free our wings and allow us to fly high.

“In India’s mys­ti­cal lit­er­a­ture, the ties that keep us earth­bound are called “knots that stran­gle the heart” because they con­strict our capac­ity to love. There are mil­lions of these ties, but per­haps the eas­i­est to see are what I call per­sonal attach­ments: pos­ses­sions and activ­i­ties we cling to that claim our time and atten­tion at the expense of those around us.

“Many of these attach­ments are mate­r­ial. Most of us have accu­mu­lated things that tie us down one way or another, often because we think they add to our sta­tus or pres­tige. Other attach­ments might be activ­i­ties we enjoy that ben­e­fit no one, includ­ing our­selves. What­ever it is, we can’t imag­ine doing with­out it. That is the hall­mark of an attachment.

“These ties might seem gos­samer, but they add up. They can bind us so tightly that we can scarcely move beyond the lim­ited cir­cle of our per­sonal likes and dis­likes. Imag­ine if your favorite pos­ses­sions were actu­ally attached to you. How dif­fi­cult it would be to drag them around even for a day! Yet the men­tal load we carry is no less bur­den­some. Shed­ding even a lit­tle of that load leaves us feel­ing as light and free as if we really did have wings.”

Read the rest of this arti­cle from the Blue Moun­tain journal.

Untying Our Wings

The dangers of financial illiteracy in America: newyorker.com

The dangers of financial illiteracy in America: newyorker.com

There’s evidence that just improving basic calculation skills and inculcating a few key concepts could make a significant difference. One study of the few states that have mandated financial education in schools found that it had a surprisingly large impact on savings rates. And the Center for American Progress has found that, across the country, education and counselling by nonprofit organizations, like the Massachusetts Affordable Housing Alliance, have helped low-income families buy and hold onto homes, even during the housing bubble. The point isn’t to turn the average American into Warren Buffett but to help people avoid disasters and day-to-day choices that eat away at their bank accounts. The difference between knowing a little about your finances and knowing nothing can amount to hundreds of thousands of dollars over a lifetime. And, as the past ten years have shown us, the cost to society can be far greater than that.

Read more http://www.newyorker.com/talk/financial/2010/07/05/100705ta_talk_surowiecki#ixzz0utzRIOlq

Wall Street, the White House, and the weak economy: newyorker.com

Wall Street, the White House, and the weak economy: newyorker.com

http://www.economist.com/node/16481295?story_id=16481295&fsrc=rss

http://www.economist.com/node/16481295?story_id=16481295&fsrc=rss

Top IT cos are all shining, what ails the rest?

India's rapidly burgeoning economy and the flood of new MNC companies have led to a shortage of first-rate mid-level managers and executives within the IT industry. This crisis is not only coming in the way of winning new contracts but also on their ability to maintain and mine existing contracts, says this article in Economic Times.

- Dilip.
____________________________________

Source: Economic Times, 20-07-2006

PP THIMMAYA TIMES NEWS NETWORK [ THURSDAY, JULY 20, 2006 12:00:00 AM]

The first quarter results from the IT services biggies have started rolling in and they have all shown impressive top-line and bottom-line growth, ranging from 35% to 50%. The story with the Tier II players, in contrast is expected to be less spectacular. And that's not because of a dearth of business. More a case of "plenty of food on the table, but unable to consume and digest it," basically due to lack of quality people in the right quantity in the mid-management. The shortage of people in the 3-7 years bracket is acute in the industry and very pronounced with the mid-sized players. Given their size and brand pull, they find it difficult to attract and retain mid-level talent which has a direct impact on their business growth. Mainly because it is the middle management that is the connecting link between the top management and freshers, performing the dual role of executing projects and mentoring. The Problem However, the genesis of this issue lies in the growth momentum of the Indian IT industry which is clocking 30%-plus rates annually. Smaller Indian IT companies, locked into small deals till the other day, have grown to a larger base with bigger deals. Plus, the MNCs (like IBM, EDS, Accenture, Capgemini) too have stepped on the gas and scaled up their Indian operations. IBM has 43,000 people on its rolls. Accenture is 20,000-plus, a good yardstick of the growth trajectory. And any MNC launching or expanding its operation in the country would typically go for the mid-level talent first. Given their brand pull, mid-level talent often makes a beeline for such companies too. Amitabh Das, CEO, Vati Consulting, a recruitment process outsourcing and advisory firm says: "Getting an experienced candidate at the right time is a difficult task. Take any organisation, middle-level professionals form the backbone of it, without them none of the projects can succeed." Typically for the large companies, if a certain mid-level professional quits half away through a project, it has the wherewithal to fill in this gap. But Tier II or Tier III companies cannot afford this luxury: if a professional at this level quits, it might mean an end to the project and consequent loss of business. Mohan Sekhar, chief delivery officer, iGATE Global Solutions says: "Mid level talent (with 3 to 6 years experience) is extremely critical for growing the organisation and delivering to clients in a predictable manner. These are challenging times for recruiting mid-level managers in India considering the robust growth of the IT industry and the acute shortage in availability of quality talent." e4e India Managing Director Dr Sridhar Mitta says the lack of adequate people at the middle level is a problem with varying degrees for both the large and mid tier companies. He adds that the pressure for a Tier II company is much higher. Points out Tarun Singh, director, Kenexa Technologies: "India's rapidly burgeoning economy and the flood of new MNC companies have led to a shortage of first-rate mid-level managers and executives within the IT industry."

However, Prashant LJ, global marketing head, Infinite Computer Solutions, feels the pressure on fresher's are much higher than at the mid-level. He says Infinite has been able to get these people and map their careers on a fast track unlike the large Tier I companies which provides limited opportunities.

Taking on board less-than-suitable candidates also acts as a double edged sword as companies will have to invest on training them, which affect their bottomlines and limiting resources that can be invested in other core activities.

Also, while the large Indian players have been active in hiring freshers and started visiting campuses a good 5/6 years ago --which now given them a beefy mid layer-- most of the mid size companies focused mainly on lateral hires, making them vulnerable in mid management.

The Fallout

This crisis is not only coming in the way of winning new contracts but also on their ability to maintain and mine existing contracts.

Das says: "Till late 90s, these professionals were loyal to their companies. Now it is difficult to retain them." Sekhar says "there are situations when lack of critical skills affects business prospects." Dr Mitta believes a combination of both internal and external measures are needed to address this problem.

Internally, IT companies need to undertake a lot of training measures whereby they could groom future mid-level professionals. Externally, companies need to look at specialised activity which can provide the edge at the marketplace and thereby attract the talent.

Prashant says creating a much larger role for the mid-level professionals and giving a higher responsibility can act as a strong incentive. Das feels that mid-tier IT organisations that are successful in training, grooming and retaining talent are able to keep afloat. "Organisations which have higher attrition levels and fail to groom the junior levels to grow to the next level suffer."

A way out for Tier II and small companies is to look at markets -- or niche domains -- that are still underserved. Industry observers say that large firms generally deal with large clients and not smaller customers.

This is a space that Tier II companies can generate business. Singh says the technology and research firm Forrester Research has predicted that "companies will now have to change to cater to the specific needs of each vertical or sub-vertical among their clients."

Charitable treatment

Far from buffeting charities, the I-T Act in fact suspends the normal rules of income computation in favour of charitable trusts so as to encourage charity, says S. Murlidharan, a Delhi-based Chartered Accountant.

- Dilip.

______________________________

Source: Business Line, 15-07-2006
S. Murlidharan

The generous handout to charity by Mr Warren Buffet, the richest person in the world next only to the redoubtable Mr Bill Gates, has understandably attracted worldwide attention and admiration not only on account of the size of the largesse to noble causes but, more importantly, for turning the aphorism, charity begins at home, on its head.

A well-known writer has bemoaned lack of such noble endeavours on the part of Indians of late and blamed it on our tax laws, which he says insist on income from charities being spent forthwith in order to be eligible for exemption from income-tax. This is not true. The Income-Tax Act, 1961 permits accumulation of income by charitable trusts for five years (earlier this was 10 years). A period of five years is sufficient for a trust to identify projects and causes needing its munificence. When gestation period for massive industrial projects is being cut down, thanks to excellent project management skills, there is no reason to apprehend that charitable trusts would end up paying taxes on their accumulated income merely due to their inability in identifying worthy causes within the time allowed.

Encouraging charity

Far from buffeting charities, the I-T Act in fact suspends the normal rules of income computation in favour of charitable trusts so as to encourage charity. To wit, buying or constructing a building would be a capital expenditure for a business qualifying only for depreciation. But not for a charity. A charitable trust would be deemed to have applied its income as soon as it has invested in a building to be used as a hospital or an educational institution. Ditto for expensive diagnostic and other equipments acquired.

Moreover, a very liberal definition of the term `charitable purpose' has been given by the I-T Act and by the courts so much so that charity in India can even assume the form of promoting the game of cricket or football if you like. There are of course provisions to ensure proper utilisation of funds earmarked for charity.

Investments in shares of companies listed or unlisted is a strict no-no, lest trusts set up ostensibly for charitable purposes are used to prop up somebody or a group. Again, the funds of a charitable trust must not be utilised for the benefit of the author of the trust or his relatives. Even this rigour has been relaxed to permit reasonable acts. For example, because the child of the trustee is getting education in the institution owned by the trust would not result in the trust forfeiting income-tax exemption.

Similarly, the funds should, pending utilisation, remain invested in prescribed avenues set out in Section 11(5). An Indian can, therefore, rise to the dizzy heights achieved by Mr Warren Buffet. And like him — Mr Buffet has announced handing over of the wealth to Melinda Gates Foundation, apparently impressed by the noble work done by it over the years, thanks especially to the excellent delivery system it has designed — he need not even set up a trust himself.

The I-T Act, while frowning upon the practice of applying the income through other charitable trusts, makes an exemption in favour of voluntary contributions with a specific direction that they shall form the corpus of the trust to which it is given, by exempting such contributions from the income of the recipient trust and thus sparing it the need to apply the same forthwith or within five years, which is the maximum period for which accumulations are allowed.

Are today's managers effective?

There is a crisis of managerial effectiveness. The overall business growth and abundance of opportunities may merely be covering up the financial impact of this ineffectiveness, at least for now. A look at what seems to be forcing managers to work one or two rungs below their real level of contribution. Many managers have ended up robbing their team members of the fundamental autonomy of being able to organise their work and operate at a pace they are comfortable with, says Sri Ganesh Chella, in this article in Business Line.

- Dilip.

__________________________________________

Source: Business Line, 19-06-2006

Ganesh Chella

I wish I had the time to do some of the strategic things I have always wanted to do. It is just that I have this temporary fire to put out.

I have always had to sacrifice my professional development because of work pressures. This really concerns me.

While I am busy through the day, I find it hard to tell myself what substantial work I have done at the end of each day.

These are the voices of today's managers who find themselves working one or two rungs below their real level of contribution.

Is it possible that many of today's managers are not as effective as they have the potential to be? What factors could be leading to this ineffectiveness?

Having interacted with hundreds of managers across levels and organisations over the years, I am convinced that we do have a crisis of managerial effectiveness. The overall business growth and abundance of opportunities may merely be covering up the financial impact of this ineffectiveness, at least for now. There are four important reasons that seem to be forcing managers to work below their real level of contribution:

Tenure

There is a growing body of evidence that points to the serious negative consequences of diminishing tenure on managerial effectiveness.

A reasonable amount of tenure seems necessary to understand the organisation's policies, processes, cultural dimensions and, most important, build a base level of workplace relationships.

Tenure also seems necessary to understand one's team and mobilise it towards a common purpose.

Diminishing tenure forces managers to compensate for the lack of team development through a much more directive managerial style with a high level of day-to-day involvement.

Team maturity

Every organisation today has to contend with a fair amount of attrition. Add to this the pressures of growth. The heady combination of managing growth and attrition means that the average manager often has to manage a team that is made up of a large proportion of young and inexperienced employees.

While it seems logical for the manager to invest in the development of these team members, managers are also under pressure to get things done. Many succumb to this pressure by taking on the role of an individual contributor.

Faith in people

In a lot of my discussions with managers about their role in championing the development of people, one thing strikes me as significant — the average manager is quite disillusioned with the futility of his efforts in championing the development of his team members.

Why should I, and what is in it for me? These are the questions they ask me and I honestly do not have a very smart answer, for the simple reason that I have never ever seen it this way!

Many managers believe that despite their best efforts, their team member will choose to leave and that they will only end up training for the street. I think that we have a crisis of faith in people, especially managerial faith.

This results in managers doing only what it takes to get today's work accomplished, be it through micro-managing or through close supervision.

Modern work style

There are three elements of the modern manager's work style that concern me a lot.

Misplaced dignity of work

Many modern managers have never had the experience of having a personal secretary or even a clerical assistant supporting them in their work. They have been brought up in the school of thought that having an assistant is against dignity of work, a sign of inefficiency and extravagance. I think this belief is quite flawed.

While I do not have empirical evidence to back my argument, I am convinced that many managers would be far more effective if they had the benefit of a personal assistant or secretary. I see managers spend time on such trivialities as booking their tickets, checking flight timings, setting up appointments, filing their papers and filing routine reports. A fair amount of staff work that consumes a good part of today's manager's time is best done by an assistant and the time and intellectual bandwidth saved will more than pay for the costs involved.

The myth of multi-tasking

Many managers pride themselves on their ability to multi-task. This translates into their taking calls, responding to mails and also talking to the person sitting in front of them at the same time. I have had the horrifying experience of being that person sitting in front of a few such managers and can tell you that it does not work.

Multi-tasking means not "being there" with any of the things you are doing — the mail, the call or the person in front. Multi-tasking is for machines, not for people.

The technology trap

A service technician representing a large Indian corporate recently visited my home to set right a piece of equipment I had purchased. The five-minute conversation that I was attempting to have with him was interrupted by about three phone calls, presumably from his supervisor. I ordered him to switch off the phone and pay attention to me.

Obviously, technology had given his manager the tool to micro-manage his team member and make life miserable for him and his customers. The same is the case with e-mails and other forms of electronic performance monitoring.

Many managers have ended up robbing their team members of the fundamental autonomy of being able to organise their work and operate at a pace they are comfortable with.

All things considered, many of today's achievement-oriented managers are nothing more than great individual contributors.

Can they ever become real managers? Will they be allowed to become one? I guess we will have to ask their managers these questions.

Philanthropy brings their joy back

A caring industrialist lights up faces of two girls and a boy, says this news item in The Hindu. May God Bless the industrialist, prays Dilip.

________________________

Source: The Hindu, 13-07-2006

K.V. Prasad

A caring industrialist lights up faces of two girls and a boy

COIMBATORE: The smile on the face of the mothers said it all. Their children have been cured of cancer and can grow up as any others in their neighbourhood. Deep in their heart, they will remain indebted to an industrialist's philanthropy.

Two girls and a boy prepare to leave the paediatric cancer wing at the Sri Ramakrishna Institute of Oncology and Research, cured of Acute Lymphoblastic Leukaemia. Director of the institute P. Guhan credits Managing Director of Kumaran Mills D. Krishnaswamy with giving the children a fresh lease of life.

Costly treatment

"It is a curable disease but a lot of money is needed for treatment," says Dr. Guhan. Six months of stay in the hospital involves daily chemotherapy and the cost of treatment during this period is Rs.2.5 lakh even if the patients are in a general ward. A special ward will take the cost to Rs.5 lakh.

"Most of the children are from families that cannot afford this cost. So, they need help from philanthropists," he points out. Many such children keep coming but are in need of funds for a total cure.

The institute, functioning from the Sri Ramakrishna Hospital, has a free ward for poor cancer patients. And, this ward - Muthusamy Naidu Memorial Ward - is also the contribution of an industrialist's family in Udumalpet.

Doctor's fee

"Their corpus of Rs.50 lakh has helped us provide 18 free beds. Poor patients need not pay the bed charges and the doctor's fee is also waived. They need to pay only the cost of drugs and chemotherapy. And, this is where philanthropists can help," says Dr. Guhan. According to him, Mr. Krishnaswamy had come to the hospital for a relative's treatment and saw the plight of the children who had completed two out their four months hospital stay. He then offered to meet the treatment cost that ran into some lakhs. "I am very happy to be a part of this movement," says Mr. Krishnaswamy, explaining the sense of satisfaction derived from saving the lives of the children. "We (he and Dr. Guhan) will continue to help them till they are completely cured." The children need to be given oral drugs after discharge, says Dr. Guhan.

Derivative and Hedge Accounting by Banks

A subject as crucial as accounting for derivatives would have been better done justice to if the professional body and the central bank had put their heads together, rather than go on separate paths of standard evolution and reinvent different wheels, says D Murali in Business Line.

- Dilip.

____________________________________

On separate paths of standard evolution

Source: Business Line, 13-07-2006

Recently, the Reserve Bank of India issued a `discussion paper' on `Derivative and Hedge Accounting by Banks'. This was based on the proposals made by an internal group formed by the RBI to formulate guidelines for the purpose.

These proposals are `largely based on the principles of IAS 39,' noted the RBI. The reference is to the International Accounting Standard (IAS) titled `Financial Instruments: Recognition and Measurement', which was issued in December 2003.

How far does the RBI's paper address the current practices? Dinesh Arora, Associate Director, PricewaterhouseCoopers, is of the view that when implemented, the proposals will place requirements on banks to document and measure the effectiveness of a hedge on a continuous basis. "This will help in dissemination of due information to all the stakeholders, and also assist the management in prudent decision-making," he says.

On whether there would be difficulties when applying the proposed norms of disclosure, Arora concedes that determination of fair value of derivative contracts is a complex process. "Also, since the derivative market is evolving at a fast pace, you get to see new products every now and then. As a consequence, the accounting exercise becomes even more challenging."

Wouldn't it have been better if the accounting norms had come from the Institute of Chartered Accountants of India (ICAI)? As if to pre-empt such a poser, the RBI has a defensive explanation in the intro to the discussion paper, in Para 1.2. There, the central bank acknowledges that the Accounting Standards Board (ASB) of the ICAI is engaged in the process of considering the subject. "The proposed Accounting Standard (AS) will address accounting of derivatives, among others," states the RBI. "However, the formal introduction of the AS for recognition and measurement of financial instruments in India by the ICAI is likely to take some time."

One more instance of how the premier accounting body has not been keeping pace with the requirements of the finance world, critics may point out. But one learns that the ASB has already finalised the draft of the proposed AS on `Financial Instruments: Recognition and Measurement'.

T. N. Manoharan, President of the ICAI, informs that the draft AS is broadly based on IAS 39. The forthcoming standard aims to lay down "recognition and measurement principles for all financial instruments, including derivative instruments, in a comprehensive manner," he elaborates.

Manoharan says that the draft of the proposed AS will be circulated shortly `among the specified outside bodies and other interest groups, for comments'. After considering the comments received, the ASB will finalise the Exposure Draft of the proposed AS and issue the same for public comments. "The final AS on the subject is expected to be released by the end of this year," outlines Manoharan.

By which time, the central bank's norm should be out. In Act I, Scene I of The Taming of the Shrew, Tranio tells Lucentio, "Master, for my hand, both our inventions meet and jump in one." He gets a fast response: "Tell me thine first." Is the ICAI more like Lucentio? Perhaps, a subject as crucial as accounting for derivatives would have been better done justice to if the professional body and the central bank had put their heads together, rather than go on separate paths of standard evolution and reinvent different wheels.

While still on the derivative theme, it may help to know that the Basel Committee on Banking Supervision of the Bank for International Settlements (www.bis.org) has released a 22-page `supervisory guidance' on `the use of the fair value option for financial instruments by banks.'

http://AccountSpeak.blogspot.com

D. Murali

Disclosures about exposures

Set against the total liabilities (that is, deposits, borrowings, and other liabilities and provisions) of Stanchart's Indian branches amounting to Rs 34,052 crore, the exposure towards forward and derivative contracts works out to 750 per cent. For HSBC's Indian branches, it is 823 per cent, and for ABN AMRO, a whopping 1,156 per cent. It would be insightful, therefore, to attempt a similar exercise vis-à-vis the net worth of the banks, and also for the year ended March 31, 2006, says D Murali in this article in Business Line.

- Dilip.

______________________________

Source: Business Line, 13-07-2006

Standard Chartered Bank's Indian branches account for the maximum total liability on account of outstanding forward and derivative contracts. The amount as at end-March 2005 is Rs 2,55,403 crore, as per data analysed by Global Data Services of India Ltd, Pune, culled from disclosures under contingent liabilities. Forward and derivative contracts are roughly in the ratio of 2:3. And, set against the total liabilities (that is, deposits, borrowings, and other liabilities and provisions) of the bank, amounting to Rs 34,052 crore, the exposure towards forward and derivative contracts works out to 750 per cent.

But there are larger relative exposures that the analysis reveals: For HSBC's Indian branches, it is 823 per cent, and for ABN AMRO, a whopping 1,156 per cent.

In terms of a ranking by absolute exposure, ICICI Bank comes second with a total liability towards outstanding forward and derivatives contract adding to Rs 2,34,702 crore. However, this is only 152 per cent of total liabilities of the bank. With a 288 per cent exposure, HDFC Bank leads the Indian banks, though occupying a distant fourth spot in a ranking by leverage, after the 750 per cent exposure of Standard Chartered.

IDBI and Bank of India appear to be the most conservative in the list, with a forward and derivative exposure of 69 per cent and 75 per cent of total liability respectively. At 137 per cent and 210 per cent, UTI Bank and Kotak Mahindra Bank had a larger exposure, though ranking last among the nine banks.

No wonder, therefore, that the Reserve Bank of India spoke in its recent discussion paper on `Derivative and Hedge Accounting by Banks' about the growing complexity, diversity and volume of derivative products. There is an "urgent need for adoption of uniform principles for recognition, classification, measurement and disclosure of derivatives and their inherent risks in banks' books of accounts and financial statements," the central bank had said.

It would be insightful, therefore, to attempt a similar exercise vis-à-vis the net worth of the banks, and also for the year ended March 31, 2006.

D. Murali

Real Estate Mutual Funds - Opening the gates to property

The contours of the regime regulating REMFs are visible — that they would be close-ended funds to start with, that the units would be traded in the bourses like the units of all close-ended funds and that they would be allowed to invest in four avenues, namely, (a) real-estate, (b) mortgage-backed securities, (c) shares and debentures of listed and unlisted real-estate companies, and (d) other securities, says this article in Business Line.

- Dilip.

________________________________________

Source: Business Line, 13-07-2006

S. Murlidharan

Real-estate mutual funds should stick to their knitting

The Securities and Exchange Board of India (SEBI), vide its press release dated June 26, had announced that it had approved the guidelines for real estate mutual funds (REMFs) wanting to set up shop in India. But, curiously, more than a fortnight after this announcement, the guidelines do not find a place in the list of operative guidelines issued by SEBI thus far and put on its Web site. May be, it is still looking at the nitty-gritty of the issue.

From the press release, the contours of the regime regulating REMFs are visible — that they would be close-ended funds to start with, that the units would be traded in the bourses like the units of all close-ended funds and that they would be allowed to invest in four avenues, namely, (a) real-estate, (b) mortgage-backed securities, (c) shares and debentures of listed and unlisted real-estate companies, and (d) other securities.

One feels slightly uneasy about (b) and (d) given the raison d'etre of REMFs — to obviate the need for buying or constructing the second and subsequent houses. In other words, if a person wants to invest in real estate he need not go through the hard grind of finding a property, finding financiers therefor, getting it registered and nursing it till propitious time comes for its disposal. Instead, he can subscribe to the units of an REMF, which will happily suffer this drudgery. Moreover, an uninitiated investor can burn his fingers badly in the rough and tumble of the real-estate market.

An REMF, armed as it is with research capabilities, can easily side step the minefields. Given this objective, why should it be allowed to invest in mortgage-backed securities, which would only fetch measly interest. One hopes the liberty in mortgage-backed securities would be restricted to a small percentage and that, too, as a stopgap arrangement when opportunities to invest in real estate have perhaps dried up.

One also hopes that too much is not allowed to be invested in other securities, lest REMFs lose focus and stray into non-niche areas. Investors in real-estate are normally in for a long haul. It would be futile to expect phenomenal returns in, say, a year's time.

Therefore, the tenure of a scheme should be at least ten years if not more. Those itching to get out earlier will have to exit through the bourses. In the case of close-ended funds, experience shows that the market quotations are invariably at a discount to NAV. Ordaining close-ended funds to publish NAVs daily like open-ended funds is perhaps to facilitate price discovery in the market. But how will an REMF find out the NAV on a day-to-day basis?

Unlike for shares — the underlying assets of share market funds — there won't be any authentic published quotation for property, the underlying asset of REMFs.

It is hoped SEBI would bestow the attention this critical aspect deserves. The mutual fund industry would obviously want units in REMFs to make the grade as long-term capital asset if they are held for more than twelve months on a par with units of other hues. But considering the unique features of investment in real estate, a minimum period of 36 months should be insisted upon. Remember 36 months is the norm and 12 months is the huge exception made in favour of the share market with a view to wooing investment therein.

(The author is a Delhi-based chartered accountant.)

A fair definition of fair value

Source: Business Line, 13-07-2006

Mohan R. Lavi

Fair value is the amount at which an asset is exchanged or a liability settled between knowledgeable parties in an arm's length transaction.

There is a joke that defines GAAP as the difference between accounting theory and practice. This may no longer be the case, with accounting regulators sparing no effort to convince companies to reflect all assets and liabilities at fair value.

Accounting Standard 28, on Impairment of Assets and largely modelled on the International Accounting Standard, ensured that companies tested assets for impairment, thereby reflecting them at fair value. And to give a similar treatment to all the other items in the balance-sheet, International Accounting Standard 39 — on Financial Instruments — urged companies to value all their financial instruments at fair value.

While this did create an uproar in the accounting fraternity worldwide, the International Accounting Standards Board (IASB) decided to issue standards in a new avatar — International Financial Reporting Standards (IFRS) — which could become the rule rather than the exception as far as global standards go.

IFRS 7 — again on Financial Instruments — will be made mandatory from January 2007. This standard has given finality to the debate, by stating that all financial assets and liabilities be valued at fair value. But the all-important question that arose was: How to define fair value?

What's fair value?

Recently, the Reserve Bank of India (RBI) brought out a discussion paper on derivative and hedge accounting for banks. This, again, draws to a large extent on IAS 39, and gives a fair definition of fair value. It defines fair value as the amount at which an asset is exchanged or a liability settled between knowledgeable parties in an arm's length transaction.

The fair value of a derivative is the equivalent of the unrealised gain or loss from marking to market the derivative using prevailing market rates or valuation technique. The fair value should be measured reliably. The discussion paper also provides examples of sources from which one can obtain the fair value:

A published price quotation in an active market;

Prices available from most recent transactions; and

Results of a valuation technique that relies more on market inputs than entity-specific inputs.

The valuation technique should be calibrated regularly and tested for validity. The Institute of Chartered Accountants of India (ICAI) has announced that the present draft on Financial Instruments will be converted into an Accounting Standard in early 2007. In keeping with international trends, one can expect a change in the draft in that the standard would call for measurement of financial instruments at fair value instead of only a disclosure, as is the position now.

Internationally, the trend is to treat effective and `not effective' hedges separately. In principle, a hedge is highly effective if the changes in fair value or cash flow of the hedged item and the hedging derivative offset each other to a significant extent. With all these changes happening at a frenetic pace, it appears to be only a matter of time before balance-sheets reflect what is mentioned in audit reports — a true and fair view of the financial position of the company.

Are women better managers?

People-management and task-orientation are said to be the two axes along which the pundits judge managerial effectiveness. There is little doubt that women are potentially better than men at almost any job that demands accepting responsibility for delivering concrete results. They plan better; they chase, badger and tame colleagues into submitting to their ways and as for relentless follow-up, women are superlative at it. Intention and competence do not equal achievement - Get the job done - and in this women are better, says Sri S. Ramachander in his article in The Hindu.

Regards.

- Dilip.

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Source: The Hindu, Dec 11, 2005.

S. RAMACHANDER

Women manage in a way entirely different from the way men do. But are they better at it?

NOT being an astronomer or astrologer, I cannot claim to know whether women are indeed from Venus and men from Mars. Or is it the other way round?

Anyway, having mulled over the matter for decades, it seems clear that women do manage in a way entirely different from the way men do. People-management and task-orientation are said to be the two axes along which the pundits judge managerial effectiveness. The woman's approach is different in both.

As a result, in a world consisting largely of men as employees at all levels, they are beginning to make their mark felt. Whether women get the right opportunities or not is much less of an issue than 15-20 years ago. Articles about women's experience of working life, and more specifically of being managers, were a favourite with editors then. Was there in fact a glass ceiling stopping their promotions in jobs? Were all professions really open and accessible to them, except the physically onerous ones such as fire fighting — the real kind, not the metaphorical one, at which of course women are brilliant!

Accepting responsibility

Take tasks first. To my mind, there is little doubt that women are potentially better than men at almost any job that demands accepting responsibility for delivering concrete results. If you think about it deeply, and observe the reality even in a relatively less affluent society like ours, this generalisation is true of the majority of women. In the poorer classes they manage even better because the woman has to make do with very little, and stretch her resources. After all, the economists tell us managing is all about scarce resources. Often she doubles up as a part-time wage earner too.

In the more educated class, working generally in the organised sector, one finds they plan better; they chase, badger and tame colleagues into submitting to their ways. And as for relentless follow-up, which men joke about endlessly, women are superlative at it. Surely it must come from the DNA, since all societies have had a division of labour that meant the woman stayed back to keep the household ticking over like clock work.

Consider what it must have meant in the hunter-gatherer civilisations. The baby needed attention or milk, the older children needed to be occasionally sorted out, small emergencies handled, from a cut finger to a major problem — and all the while the cooking-cleaning-mending routine went on, with no gadgetry to take the place of manual work. What better situation can you think of, to teach one to manage time, to prioritise, plan and just get on with the work? Surely, the ability to take on difficult, repetitive, even thankless tasks and do them superbly well, day after day (which is in a nutshell what all the books and courses want us to learn) must have been etched thus in the female psyche aeons ago?

Administrative skills

Today's business scene or even non-commercial organisations need superior administrative skills, particularly of managing people and systems — which require a combination of this consistent performance along with the nimbleness of mind and body to respond to minor crises. No wonder women are better equipped here as well. The strange thing is that this has not been recognised and given due credit. Take for example the much talked about total quality management approach or TQM. One of its pillars is daily routine management, according to set processes, to learn which all we need is to look around us at home. Households run only because the daily routine — such as boiling milk, packing the lunch box or setting curd with yesterday's buttermilk — all goes on with faultless precision, and on time, with fall-back choices even in times of great stress such as illness or bereavement.

Of course, no one has taken the trouble to describe this with fancy jargon such as "seamlessly managing the end-to-end value-chain 24 by 7". That is all the difference! Doubtless one day some business school professor in the U.S. will discover this with amazement and publish an article in Fortune magazine, exactly as happened with the dabbawallahs of Mumbai and their six-sigma level accuracy in logistics. Don't forget that an economist has already won the Nobel for saying that the informal household sector represents an un-measured part of the GDP. A UN report some years ago estimated it at over eleven trillion dollars a year!

The starting point in the factory floor quality management for example is the process known as 5-S, which tells us to clean the workplace first, put everything in its proper place, mark and designate places and bins correctly, get the right tools for the job, and clean up afterwards and so on. The breakthrough here is that, unlike in the past, the person doing a task is charged with keeping the machine clean and looking after quality. "Put everything back in its place" reminds me of my grandmother for whom it was a lifelong refrain. "Let your hand do what the eye tells you must do" she used to say, meaning that you should keep an eye out for "deviation from standard", and most important of all, not wait to be told! No doubt, as she was married at 13 and had not gone beyond the fifth grade in school, this sound philosophy of managing came down to her not from books but through other women managers before her, an endless line of mothers and aunts stretching back into history.

The second aspect of human relations is a women's speciality. Here women manage the age-old paradox of management much better, juggling praise and criticism expertly; and never leaving anything to chance or taking it for granted, erring on the side of making sure at any cost rather than assume others will find a way. "We trust, of course," Mikhail Gorbachov is supposed to have said of the Soviet attitude to anything, "but we verify".

Get the job done

This would be cynicism for many men, but a woman finds nothing wrong in it. She knows from experience that with the best of intentions, the men in her life repeatedly say, "Oh leave it to me" and then come up with creative excuses for not remembering to order the gift, buy an essential medicine or ring their mothers on their birthdays. Intention and competence do not equal achievement — and she knows this to be an axiom. So if asked to choose between the directive and supervisory style on the one hand and the supportive, coach-mentor style, the woman loses no sleep over the choice. The latter is for the birds; get the job done first, the punditry can come later (at seminars!) is her general attitude.

Readers will have realised that there are many men too who lead by the so-called women's style of managing described above. That is exactly my point: there is a yin and yang in management and some men adopt the one that falls far more naturally in the realm of their "better half" and they manage the better for it. It is quite possible that the strong-willed go-getting CEO's have been brought up by a very capable and active mother and learnt from them unconsciously. To me this alone can help explain the popularity of the genre of leadership that was made so popular by Jack Welch of General Electric, the U.S.

Who knows, since tough times are more common that good times, perhaps what the world needs is more `feminine' managers among men too.

Planning prevents panic

16 interesting points from a book review by D Murali of Business Line of W. Neil Gallagher's "The Money Doctor's Guide to Taking Care of Yourself when No One Else Will," from Wiley (www.wiley.com)

1. Good habits pay off for the elderly.
2. A thorough annual check-up.
3. Run.
4. Eat fruits and vegetables, and low salt and fat.
5. Restrict calorie intake.
6. Drink at least 8 cups of water a day.
7. Read.
8. Walk.
9. Don't watch TV.
10. Drive defensively.
11. Build a desire to win.
12. Build strong relationships.
13. Get involved... stay involved.
14. Laugh long, loud, and often.
15. Give and forgive.
16. Stay positive.

I reviewed my performance and found that even by a process of liberal interpretation, I follow only 7 out of 16 [just passed ?]. How about you? Regards.

- Dilip.

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Source: Business Line, Dec 11, 2005.

D. Murali

CHECK if you agree with the following statements: "I don't want to spend my final days in a nursing home. I don't want to be on welfare (aid). I don't want my family's health and finances ravaged because of my aging and death."

If yes, here is W. Neil Gallagher with "The Money Doctor's Guide to Taking Care of Yourself when No One Else Will," from Wiley (www.wiley.com).

First, get rid of the GSP syndrome, he urges. The abbreviation means, "Government is good. Society is bad. People are helpless." GSP is silent and systemic, contagious and fatal, warns the author. "With GSP, you give up. You see everyone else giving up. You have no control over your future (so you think). You surrender life and death, health and family to government." Shake it off, because "you can retire safe, early, and happy and healthy," exhorts Gallagher.

Chapter 1, on `nursing home abuse', can frighten you from falling sick. Common abuses include "untreated bedsores, inadequate medical care, malnutrition, dehydration, preventable accidents, and inadequate sanitation and hygiene," informs the author citing a recent Congressional report.

"Thirty per cent of nursing homes across the US cited for 9,000 instances of abuse." Wonder what our numbers are!

The US Government Accountability Office (GAO) classifies under `crimes of omission' failures in feeding the patient, taking him/ her to the bathroom, changing bandages and so on.

"The GAO found that the primary causes of death in nursing homes are dehydration and malnutrition." Go for LTC or long-term-care insurance, suggests the author, because "at 65+ you have a 50/50 chance of needing LTC."

Make it to 98 and love and live every minute, with tips that fill an entire chapter. "Good habits pay off for the elderly," notes Gallagher.

On the physical side, suggested strategies are: get a thorough annual check-up; run; eat fruits and vegetables, and low salt and fat; restrict calorie intake; `be accountable for your eating habits'; choose a suitable version of fast; drink at least 8 cups of water a day; `keep that sexy smile and take great care of your teeth'; do slow and low weightlifting; read, walk, and don't watch TV; and drive defensively.

On the emotional side: "Build a desire to win. Embrace the perspective. Build strong relationships. Get involved... stay involved. Laugh long, loud, and often. Give and forgive. Stay positive. Take control. And dump the guilt." Your `intellectual' survival tactic should be to `learn and grow every day' because `your mind is a muscle'.

Gallagher lists `powerful strategies that protect profits and provide peace of mind' in a chapter called `the plan'. There are `six savage attacks on your money', he cautions. "Any one of these attacks can rip you apart: 1) public disclosure of your finances and personal business; 2) taxes at all levels; 3) lawsuits; 4) government seizure; 5) market risk; 6) inflation and the escalating cost of living." Check if you have the `bullet proof documents' to shield yourself from these attacks; remember, "Planning prevents panic."

A vicious circle that hits you on the face is `caring for momma -{gt} fatigue -{gt} resentment -{gt} guilt'. Statistics show that the caregiver dies before the care receiver, `from sheer exhaustion', wearing out `emotionally, physically, and financially'.

A practical truth, therefore, is: "You shouldn't assume your kids will take care of you," because they lack energy, assets and time.

"Another misconception people have is that their spouse will take care of them, and vice versa."

To check if you can really take care of your spouse when you are both older and weaker, Gallagher suggests a quick test that you can try right now: "Tell your spouse to lie in bed, as dead weight: a sack of cement. Lift them out of bed. Guide them to the bathroom... " What's the result? Can't do it?

The final chapter is devoted to the caregiver. "Just like child-rearing, caring for an elder adult is a full-time job." Surveys show that many caregivers are men, 80 per cent assist relatives, and almost one in five caregivers provide 40 or more hours of care per week. As caregiver, you need to pay attention to attitude, Gallagher writes.

Commitment is must. Also, realise that "what you've got and where you are is plenty good enough to build again."

Caring for the old will be one of the major challenges, forecasts the author. Even countries that enjoy a younger demographic profile have to confront the problem later. But the reality is that there is no one at home to look after an aging, infirm parent, rues Gallagher.

He cites Robert Frost's definition of home in `The Death of the Hired Man' as "the place where, when you have to go there, they have to take you in." Now, if you went there, chances are you'd find nobody home, quips the author.

Essential read as a `safety net'!

**

BookValue@TheHindu.co.in

Awesome simplicity - Tribute to MS

M.S. Subbulakshmi has passed away but her legacy, of humility in success, continues to serve as an example for younger artistes, says Vatsala Vedantam in a moving tribute to MS.

Regards.

- Dilip.

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Source: The Hindu, Dec 11, 2005.

VATSALA VEDANTAM

It is a year since M.S. Subbulakshmi passed away but her legacy, of humility in success, continues to serve as an example for younger artistes.

I MET M.S. Subbulakshmi for the first time in 1943, in a dingy, run down theatre called Olympia Talkies. It felt great to watch a "talking movie" in those days. And this was a "singing movie". There she was, dangling her legs from a tree branch and singing Anandam en sholvenen... with total abandon, while her screen paramour GNB hovered in the background. My infant mind was thrilled beyond words.

I saw a picture of the same dazzling girl hanging over a doorway when I went to interview MS for an article in 1993. She had travelled a long way during those 50 years. So had I, and those of my generation. From the days of sitting glued to the HMV gramophone and listening to her high-pitched voice singing Bharathiyar songs to her graduation into the rich cadences of Bhaavayaami and Shambo Mahadeva on long playing records. We drenched ourselves in Annamacharya kritis on audiocassettes; and, still later, melted with her immortal Kurai ondrum illai.

Transformation

Those of us who grew up with MS witnessed her transformation from a charming debutante with a voice that knew no limits to a graceful artist who took you "one step nearer to God". We were the fortunate ones who were able to experience something "that happened once in a millennium".

When I finally saw Subbulakshmi in flesh and blood in 1993, I was struck by her awesome simplicity that left you weak kneed. Her homely offering of sukku kapi — with the recipe thrown in — may have come from any housewife in Chennai and not from a superstar who took the world by storm with her music. Her naïve confession of feeling nervous before a performance spoke of humility rather than lack of confidence.

A statement supported later by her accompanists who recalled her asking them minutes before a concert: "Do you think I will sing well today?" Maybe, it was this innocence of her own eminence that set Subbulakshmi apart from others. Her multiple achievements in cinema and music, her rise to fame from small town girl in Madurai to the United Nations forum, are well known. I prefer to recall more intimate moments of graciousness shared by those who knew her personally. People like Semmangudi who was not just her guru but also a bridge crony of her husband Sadasivam. The veteran musician often recalled how she would send the car punctually at 2.00 p.m. every day to pick up the foursome who played cards with her husband while she herself acted the perfect hostess.

Or, her adopted son's teenaged friend who could not forget the delectable dosas she would make for two hungry boys. Years later, she would come all the way from Madras to Bangalore just in time for his wedding to sing Sita Kalyaanam Vaibhogame while the swing swayed to her music and the entire wedding hall listened in hushed silence. "That was MS," according to Acharya, the lucky recipient of this warm gesture.

Then, there was "Papa" Venkataraman, the sound recordist for the Hindi version of Meera. He would describe her affectionate concern for the Pandyan brothers and other technicians at Sree Sounds Studio where the film was made. And, her amazing patience with Ellis Dungan who directed the film, or her childlike glee when N.S. Krishnan and T.A. Mathuram performed Villu Paatu at Kalki Gardens.

Difficult times

"She was such an extraordinary person that I used to wonder why someone had to cover my eyes and warn, `Don't look at her!' when this 16-year-old girl entered the Music Academy in Madras for the first time in 1932." Amazingly even her close acquaintances have always been reluctant to talk of her early years. They prefer to shroud it in secrecy although it is that same "unmentionable past" that made her a Bharat Ratna. In early 20th Century Tamil Nadu, with its conservative and often hypocritical attitudes, it was not surprising that a Brahmin family would admonish a son for walking near Hanumantharayar Koil Street in Madurai where Veena Shanmughavadivu lived. My brother-in-law Narasimhan, who spent his early years in Madurai, never forgot how his mother thrashed him for stealing past the musician's house to see her and her lovely daughter, Kunjamma, practise on the veena. Finally, it took a Gandhi and a Kanchi Periyaval to recognise Subbulakshmi as a woman out of the ordinary.

Yet, unmindful of the calumny and criticism heaped on her by an uncharitable press and a still more uncharitable society, MS bravely travelled that long and difficult road from Madurai to Rashtrapathi Bhavan. We too have come a long way from the days when even a great vidwan like Ariyakudi Ramunuja Iyengar admonished All India Radio for paying him the same performing fee as "that woman". It has taken us just half a century to realise that "that woman" was one in a million with her incredible singing talent, her scholarship in music, her purity of diction, her bhakti in life and performance.

Venkatachalam would ring me whenever MS and Sadasivam visited his family in Bangalore. On one occasion, some of their old friends like Nittoor Srinivasa Rao, Veena Doraiswamy Iyengar and others were present. It was a great photo opportunity. Seated in a corner of his living room, I was taking pictures when she walked up and said: "Why don't you also sit with us for a photo?"

She asked Athma to take my camera and moved over to make place on the sofa. That picture next to MS, which she later autographed, is a prized possession. That was when I told Sadasivam that it would give me great pleasure to write a book on her. "The pleasure may be yours, but the risk is ours," he retorted. Then, more kindly, "Write whatever you want after we are both gone!"

It may take generations before we find another Subbulakshmi. One year ago today, she vanished from our midst. But she has left a priceless legacy for younger artists. The legacy of humility in success.