Good for organisation is good for all

Any organisation or corporate entity has several stakeholders attached to it. Here for the sake of simplicity, we shall stick to a banking entity, part of the industry that I have remained associated with for decades.

The first stakeholder is the promoter; while for PSBs, Government is the main shareholder and promoter in that sense, this stakeholder is more relevant for the likes of Indusind and Kotak, where an individual and a family clearly enjoy this position. ICICI, HDFC and Axis have always been institutionally promoted and currently widely held mainly by FIIs.

The second stakeholder are shareholders; for listed entities, retail investors are more vociferous and employees through ESOP routes also assume the status of being a shareholder. Institutional shareholders are more strategic and have a bit longer term perspective.

The next important stakeholder are the employees led by the CEO. While the top management provides vision and leadership, the middle and lower management actually manage day to day affairs. The top leadership is a major beneficiary of high salaries, perquisites, bonuses and ESOPs that’s justified given their larger responsibility in achieving corporate goal and vision.

The last stakeholder in this chain are the customers who provide the fodder to the bank by trusting it with their deposits and borrowing funds to start/expand their business.

In the sense of value or importance, the last stakeholder viz. Customer, assumes the most important position as the company survives to see another day till it has customers and their transactions to handle! Therefore, it’s important for any promoter, shareholder or management to do what’s ultimately right for the customer. And I am not talking anything new. When I joined banking industry four decades ago, the importance of customer and his satisfaction was never understated! And what started as customer service, gradually evolved into customer satisfaction and further into custom centricity. Now, some organisations are taking this into a different level calling it customer obsession.

And mind you, my above view is nothing new arising out of my current status, which is merely that of a customer of a bank. Customers trust banks with their life’s earning and it’s paramount upon all the stakeholders to keep customers’ interest uppermost. Everything else – promoter’s investment returns, shareholders’ value appreciation, employees’ remuneration should come after customers not necessarily in this pecking order.

The provocation for this post is the Q4 results announced by my erstwhile organisation that has reported losses due to upfront booking of total cost of acquiring Citi’s retail business as a good conservative policy. Obviously, this has earned the wrath of some retail investors who feel that this has been done to deprive them of higher dividends and also adversely affected their chances of exiting at a higher market price. My take if that if it’s a conservative measure aimed at the eventual good of the organisation ( and hence its customer) , let’s take it as an ultimately a good step rather than what could be a temporary aberration for other stakeholders. If something makes an organisation stronger, it’s for ultimate good of all concerned.