Indians and the funda of materiality
November 22, 2010 2 Comments
In a recent issue of the Economist, I came across an article on the Chinese takeover of global companies. What caught my attention was this offhand comment quoting an unnamed business exec, about the relative difference between negotiations with Indian and Chinese bidders
One oil executive ran an auction of a firm that ended with an Indian and a Chinese bidder (both were state-controlled). The Indians had “no concept of materiality”, he says, and were mired in nit-picking. In the final stages they returned the draft contract riddled with amendments. The Chinese firm returned it clean, and won.
Why is that? Why is it that Indians (and now, people of Indian ethnicity living everywhere) are being projected as a community of nit-pickers? Could it be true that Indians truly lack a sense of materiality in our legal dealings?
Fetish for detail + One-Upmanship + Failing grade in Negotiations 101. This seems to be the formula Indian companies seem to be taking to the negotiation table. The lawyers seem hand selected for their bookish knowledge, and their ability to parse legal documents in order to write length academic arguments. As they approach their deals, they could consider it their primary responsibility to red-line every term in the contract. Never mind that the negotiations are meant to be win-win exercise and all that BS. No, No! Any dialog is an opportunity to score points, and the more red ink I piss on the other person’s contract, the bigger my score-card.
As India and Indians acquire a more stable and prominent position on the world business and political stage, I am sure desis will learn to let go of petty schoolboy taunting, and focus on the big prize.
Till then, everyone will just have to tolerate our eye for detail as a cultural trait. Sorry, Sir…what to do, we are like that only!
About Gaurav Rastogi
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Gaurav Rastogi
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I think there are also a number of people who engage in the “immaterial” contract negotiations as a time wasting tactic, while they figure out whether they actually want to do the deal or not!
Instead of putting it down to our “Indianness” (ie something inherently ‘argumentative’ about us, with apologies to Sen), however, I would prefer to think of it as a combination of our business culture and our own Indian legal systems. Our business culture is extremely risk averse. We expect to be cheated in every transaction. We expect our counter-parties to go bust, the economy to nose-dive, the regulations to change. We expect forces majeure galore – because doing business in India has always been fraught with risk, and loss/bankruptcy is a social stigma in India (far more than in the US).
To add to that, we hate taking anyone to court, because our own legal systems are slow and whimsical. So our instinctive reaction is to stamp out any scope for ambiguity in contractual terms. Passing up a deal is infinitely more preferable to us than the death by a thousand cuts that comes from a long and costly legal battle with no guarantee of success. And finally, because we are so used to searching each rule for a loophole to exploit, we expect our counter-parties to do the same, and so we approach all legal documents with suspicion and fear, as if our counterparties are village money-lenders asking us for a fingerprint on a piece of paper while giving us a loan.