The Robber Barons

The Hindenburg Report on the Adani Business Group released on 24//1/2023 has generated a lot of controversy apart from blood-bath in the stock market for Adani Group company shares. 

But is the kind of corporate wrong-doing as alleged in the report unique? It is difficult to believe that Mr. Nathan and his associates have not heard of the Standard Oil Company and its promoter John D Rockefeller, who at one time was supposedly the richest man on earth and all the manipulations which went into building up the monopoly which was the Standard Oil Company, before it was broken up.  

Incidentally, the term "Robber Baron" evolved in the 19th century in America to describe successful industrialists whose business practices were often considered ruthless or unethical. Included in the list of so-called robber barons are Andrew Carnegie, Cornelius Vanderbilt, and John D. Rockefeller. Very respectable business families in present day America!

The Hindenburg Report is far from being unique in its perspective. We have had many wholly Indian studies and reports which has pointed out various kinds of shenanigans by our entrepreneur class.

For example, the Hazari Committee Report of 1967, which, inter alia, stated, "It is to some extent legitimate to infer, that Birla enterprise, justifiable or not in terms of ultimate performance, does tend to pre-empt licensable capacity in many industries. … It is perhaps no accident that certain Birla companies which appear repeatedly among the ranks of applicants - and some of which do get approval for their proposals – have little to boast of in their balance sheets and profit and loss accounts. … There appears to be some evidence that a few influential houses make a deliberate attempt to foreclose licensable capacity by putting in multiple applications and taking our several licenses for the same product."

Or for that matter the preamble of the Omkar Goswami Committee Report of 1993 which states in so many words, "There are sick companies, sick banks, ailing financial institutions and unpaid workers. But there are hardly any sick promoters."

The findings of the Hindenburg Report are more suggestive of failure on the part of SEBI and RBI in adequately and comprehensively regulating the functioning of our financial markets so as to both protect investors and maintain sanctity and robustness of our financial markets.

What is troubling is whether SEBI & RBI missed picking up the alleged machinations in a proactive manner. Even more intriguing is their silence for over a month in addressing the allegations made in the Hindenburg report. SEBI had to be eventually nudged by the esteemed Supreme Court to investigate and come out with its findings. Something which is its primary role as the capital market regulator.

While aberrations in the functioning of financial markets are natural and expected, their constant monitoring and the evolution of corrective measures by the regulators is essential for progress of our economy and society.  

Only a strong institutional framework will ensure a strong and prosperous nation.