What women want: Reservation or Egalitarianism?

A call for reserving one-third of the seats for women in Parliament is not unique to India alone. Similar demands have been made and laws passed to that effect in Europe. Viviane Reding, the EU’s Justice Commissioner hopes to have 30% women on European Boards by 2015 and 40% by 2020. French Law requires 40% seats to be reserved on the Board by 2017 for women.  Norway has a quota since 2006. Similar quotas are expected to come across all EU countries soon as European Parliament has passed a directive to that effect.  With this sudden wave of quotas in Boards and Parliament, an economic and socio-legal analysis of their effect becomes important.

It is rather true that women are grossly underrepresented in legislatures and boards of companies. This under-representation on grounds of equity and a call for a more egalitarian society calls for reservation. From an economic perspective, the question arises if it is efficient. More importantly, from an egalitarian lens too (the goal that the legislation seeks to promote), is it good for women themselves in the long run.

 The emerging power of women in the workforce is a recent phenomenon. Earlier more confined to the safe precincts of home or traditionally occupied in women-friendly jobs such as a teachers, nurses and doctors; women found it convenient to synchronize their work-life balance in these traditional women-oriented set-ups & professions. Even today, it is not uncommon in a typical household(an Indiand home for sure!), to expect the women to perform all household chores and work at the same time. So to create the work-family life balance (though one often wonders why it is more emphatically expected of  women alone), women resort to the safer havens of un-ambitious, steady professions.

With changing attitudes, more liberal families and parental support; the outlook has begun to drift. And women are taking increasingly challenging and time-demanding professions. A male-dominated structure of the corporate set-up & legal profession makes it difficult and extra long for women to attain the same stature and pay levels. It is often a common complaint and is a proven fact that women are under-paid, under-promoted and are struck somewhere in the middle of the ladder. Reservations are an oft-suggested panacea for the problem. But the question emerges if it is the best available remedy? There are two important problems that arise with this. Women, who will make their way to the top; even with a little help of reservation or even on their own merits completely, will be seen as incompetent figure-heads who simply got an important promotion or board stature, by virtue of being women.

An important aspect of leadership is the respect and acceptance that one has because of their merits, competence or charisma. With reservation, this opportunity to gain acceptance is lost at once for women. Secondly, from an economic perspective, it might be inefficient. Often just to fill up the posts, in-competent people (women in the present instance); might be promoted to important positions. This affects the efficiency, the productivity and bottom line of the company. At the Board level, important strategic decisions need to be taken. A lack of exposure, an inexperience in the corporate grinding and the missing struggle, which competent people have to go through to earn their positions will get reflected in such reserved representation. This will affect the stakeholder and shareholder fortunes. Moreover, some competent people, who would have otherwise occupied the positions will miss it just because they are from the wrong gender, male gender in case of a reservation loving society. Exactly the same way, as competent women almost always lost it, just because they were women;  apprehensively and undesirably now it will indeed be a case of reverse-discrimination.

No matter how skewed is the representation, a catapulation to the top should be based on meritocracy. Reservations will tilt the shift towards mediocracy. Economically speaking, it is inefficient for the company, the parliament, as the case may be and certainly for the society as a whole.

The problem however is that in the present backdrop, without any legal or social mechanism, the meritocracy based competition will be meaningless. The question then arises is if reservation is not a solution, then what is. A good solution perhaps is to create a boardroom conducive to women. Simply put, this means a gender-neutral corporate world. Look at the corporate world. The language derived from the military is sexist and alpha-male. How we talk about competition, predatory pricing and shareholder wealth clearly reflects; that this definitely is not a women’s world. A women’s world would focus more on the stakeholders’, be more feminine with an approach to sustainability rather than the bottom-line. And that is indeed desirable in the present context with increased focus on sustainability as a means to attain the goal of triple bottom line: the people, the planet and the profits.

Secondly, on a more social front; there needs to be a change in the mental set-up, the outlook and the perceptions.  On a personal front, a women undoubtedly(and in a sense pleasantly) has more responsibilities towards the family. She is a mother, a wife, a daughter. All the roles are demanding. Motherhood perhaps is the most taxing in terms of time that a women has to talk off from her career life to give birth to her baby and through all his/ her childhood years and thereafter. Except for certain periods, when a women really needs to take a leave to bring a new life to the world; most women desire to work with flexible working hours with increased commitment to work once the child starts growing up. On a professional front, such special needs of women deserve particular attention; considering that a women delivers not just a child; but by bringing a well-groomed individual; she contributes a value ‘human resource’ to the society. Moreover, it is a well proven fact that well-educated, working and independent women bring up their children well. This then is a women’s special contribution that deserves special social recognition in the form of mother-friendly laws to help her create a work-life balance. For single mothers, this can be even more demanding. And for mothers bringing up a child with her partner; she needs greater cooperation from him. The point is some women might want to get back to work immediately or after some time after giving birth to a child; depending on individual case and personal preferences. In such a case, the laws should enable either of the parents (and not just the mother), to take time off from work without any prejudice to their future career prospects. Socially, there needs to be an acceptance of this ‘feminity’(as opposed to feminism) and ‘family life’, a celebration of the same instead of creating hiccups for a mother to get back to work.  

An imprisoned 'talented' women duty-bound in the traditional stereotypes will only lead to an imbalanced society; society with women making it to top through reservation or a society without sufficient opportunity to help women create sufficient work-life harmony are all dangerous trends leading to an imbalanced society. 

‘Antitrust’ and ‘IPR’: A tumultuous tie

Patents, according to Shapiro confer partial property rights. These rights are an important incentive for a company to invest in Research and Development as it gives the desired assurance to reap benefits from these investments once a socially beneficial product or service is produced. Intellectual Property(hereinafter referred to as ‘IP’),  also has a prominent public good characteristic as the information so generated is of great social relevance. However, these partial property rights can be a source of expected monopoly power ex-ante. Informational asymmetries thus, exist at the time when IP rights are awarded to the moment when Competition Law(in some jurisdictions referred to as the ‘Antitrust’ Law; the term will there be used interchangeably in our discussion) steps in. Thus, there are these tender opportune moments when IP rights become a source of monopoly power and thereby create a dynamic interaction between two important domains of Law: the IP and Competition Law.

An interesting case throwing light on this dynamic interaction is the ‘Inter-operability of servers’ as emerged in the case of Microsoft. The case is interesting for two reasons. First, the kind of protection offered that is the software in case of Microsoft has been protected through both patents and copyrights. Secondly, the almost simultaneous treatment of the issue of abuse of dominant position across two important jurisdictions of the US and EU.

Interoperability of servers is one of the attractive and challenging domains where law and economics dynamically interact. Microsoft was tried across both sides of the Atlantic: the USA and the EU. The diverging approach has been succinctly summed by John Vickers when he states, ‘When contemplating Competition Law and Policy, many economists I suspect, are somewhere in the Atlantic Ocean’. Notwithstanding, the similarity in the legal principles across two jurisdictions, Microsoft was confronted with two different treatments on either side. Whereas the US approach is often criticized to be too lenient, the EU attitude was called to be too strict.

In the US, the Federal Trade Commission started its inquiry in the early 1990’s trying to investigate if Microsoft’s pricing policies thwarted competition. The Justice Department meanwhile in the year 1997 charged Microsoft with trying to leverage its dominant position in the operating system market, through Windows,  by bundling its Windows OS with the Internet Explorer. Through this bundling, it was alleged that Microsoft threatened to wipe its competitor and the then lead player in the web browser market, the Netscape Navigator. 

Meanwhile, in the Europe, in its September 15, 1998 letter, Sun Microsystems requested Microsoft to ‘provide complete information’ that would aid Sun make its operating system compatible with Window’s operating system. Microsoft’s refusal to cooperate prompted Sun Microsystems to complain to the European Commission (hereinafter referred to as Commission). The Commission carried its investigation against Microsoft as regards two issues: First, if the refusal to supply information to the Sun Microsystems was an abuse of dominant position by Microsoft. And secondly, whether the tying of the products, its windows operating system with the Windows media player was again an abuse. The common thread in both the cases was the Commission’s finding that ‘Windows’ was the dominant PC(‘client’) Operating System(hereinafter referred to as ‘OS’)  with a market share of 90% and thereby, was a defacto standard for client OS.

In the US, the dispute ended in a settlement with namesake punishment for the Microsoft; whereas in the Europe, the Commission concluded an abuse of dominant position by Microsoft. Microsoft went on appeal in the Court of First Instance which was annulled by the Court and the company finally decided not to pursue the case further. In the EU, heavy fines were imposed on Microsoft. The software giant was also required to have a version of Windows without the Windows Media Player. According to the decision, Microsoft could not charge more for the unbundled version then for the bundled version; however, Microsoft is not required to charge less for the unbundled version then for the bundled version. To this, the Microsoft complied by offering a ‘Windows N’ which is without the media player. As for the second important issue of ‘interoperability’, Commission required Microsoft to license the protocol at a reasonable and non-discriminatory royalty. Initially, Microsoft refused to comply with the last demand; however, when the Court of First Instance rejected its appeal, Microsoft agreed to license the protocol at three different terms.

Commission’s insistence to make Microsoft license its protocol reflects the partial nature of these property rights. If exclusivity is the incentive to innovate; then the exclusivity in certain cases can be taken away as a rationale to uphold an innovative environment. As the Commission in its decision argued that disclosure of information would increase the rivals incentive to innovate; while at the same time not reducing the incentives for Microsoft. In other words, there is a need for an economics based approach in the enforcement of Antitrust Law. Article 82 was eventually replaced by the Article 102 of the Treaty for European Union. 

Poverty of International Law in ‘Unsustainable’ Supply Chains

With increased incidence of human & environmental rights violation, by outsourced activities either directly or through their suppliers, the value chain management of manufacturing companies particularly transnational enterprises has come under a scanner. Global reach of multinational enterprises creates global impacts and visibility of their activities to a larger audience. Increased visibility led to greater protests worldwide in case of violations. To shield from the continued criticism, companies increasingly adopt the United Nations’ Global Compact principles. Over 5000 companies across 130 companies are signatory to the principles. The principles encompass the important domains of Human Rights, Labour, Environment and anti-corruption. Inspired from the Universal Declaration of Human Rights, ILO’s Declaration of Fundamental Principles and Rights at Work, Rio Declaration on Environment and Development and the United Nations Convention against Corruption ; these principles are voluntary in nature and very importantly cover the important ills that plague the supply chain relationships.


Notwithstanding the wide adoption of these principles, unabated violations continue. Electronics industry is highly criticized for its laxity in supply chain audits and thereby, obliquely permitting these violations. From Microsoft to Apple, Dell to Hewlett Packard the problem subsists. Increased public scrutiny of Apple due to its media trial and its subsequent tightening of supply chain regulations is anticipated to bring a positive ripple affect across the industry. These are impacts driven by media campaigns and consumer awareness. There is also a need for a more stringent legal backdrop to ensure innovation-loving consumers do not unwittingly find themselves hold another Nike shoe or Apple i-pad with a pang of remorse.

The United Nations Human Rights Council in 2008 adopted the United Nations Protect, Respect, Remedy Framework wherein it categorically laid down that the business everywhere has the responsibility of protecting human rights. But such an occasional communication from the global organizations, without any corresponding acceptance of the same in legal jurisdiction is meaningless. The guiding light notwithstanding its toothlessness, is laudatory, considering the beacon of light it provides to companies that aspire for sustainability. The responsibility to respect is believed to a baseline activity. Companies should therefore, take responsibility for activities that visibly have a direct impact such as the production process; product or services that the company provides; labour and employment practices; provision of security for personnel and assets and company’s lobbying and other political activities. To ensure this the company must conduct a due diligence of its activities. The report further stipulates a Human Rights management framework which shall consist of four elements: First, a statement of policy. This statement can be integrated into the company charter or it can be a stand-alone policy. Second, it should have a framework for assessing the impact of its activities on human rights. Third, the human rights policies should be integrated with the companies objectives and integrated into the companies policies and Finally, there should be a tracking system to observe if policies have been implemented successfully and reporting of the same to ensure accountability in operations. The 2008 framework with these four steps, provides a broad outline skeleton for a human rights management framework.

Like the United Nations Global Compact laws, other significant international standards for corporate responsibility on human rights are the OECD Guidelines for MNEs(2000), the ILO Tripartite Declaration of Principles concerning MNE & Social Policy(2000) and the IFC Performance Standards on Social & Environmental Sustainability(2006). However, all of these, like the Global Compact itself are good and provide a framework for corporate responsibility but none of them is legally binding.

From a somewhat cynical perspective, councils meet and announce a guiding principle; but without a strict enforcement mechanism there is nothing forcing the company from violating or ignoring a violation of the same. In other words, such resolutions are at best toothless tigers. It may be interesting to note that the Universal Declaration of Human Rights were codified into International Law through two 1966 treaties that is the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights and are collectively referred to as the Bill of Rights. With more Corporate flutter globally, it may likewise be relevant to consider codification of a global accepted level of responsibility for Multinationals such as the UN Global Compact Principles, into International Law. The point is even though these principles derive form International Law, they are themselves not International Law and the time such as present is an important moment to give them the same level of explicit recognition.

Copyright: Of Expressions, not Ideas!

It is often questioned why there is no copyright on ideas. Governed by the Copyright Act, 1957, The copyright law protects the creators of literary, dramatic, musical and artistic works & producers of cinematographs films and sound recordings. However, this protection is awarded to the works and a mere idea is not protected under the Act. It is the expression of that idea that is protected. Imagine the typical Bollywood, boy meets girl folklore. The idea has been successfully produced and re-produced in the glorious hundred years of Indian cinema- the same idea, the same underlying theme, but each time(presumably) a different presentation, a different script, a different expression. If the first idea of Laila-Manjnu or Heer-Ranjha was protected, we would never had the opportunity to watch those endless romantic movies!

Thus, there is an economic logic that drives this underlying reasoning of the Copyright Act in India(as any other IP protection Act for that matter). And the economic rationale is if the fist individual who claims an ownership of the idea is given such an exclusive right, then we provide him with a rent-seeking opportunity merely on the basis to be the first one to have an idea.  

Innovation & IP Protection: The 'I' Factor

New information generated has a public goods character that is it is of benefit to the public at large and once common knowledge, it can be widely used. To generate this new information, the Government has to create some incentives. These incentives are in the form of IP protection. The valuation of a asset at the time when these rights are granted to the moment when they create a monopoly position varies tremendously. At the time of granting IP protection, a legal monopoly is generated that is the exclusive right to benefit from the invention and aspire for rent-seeking behaviour. But the extent to which this power generates monopoly power ex-post is referred to as the economic monopoly. This depends upon a number of factor. Most significant amongst others being the innovativeness of the invention that are there closely available and cheaper substitutes available for the product. Availability of closely available substitutes devoids the product of its potential rent seeking behavior. Secondly, as IP enables pricing above the marginal cost of producing a good, it attracts entry of competitors.
Thus, for an IP protection to lead to Significant Market Power(SMP) and thereby, a case for antitrust intervention, the innovativeness of the product and consequently its monopoly power ex-ante become a critical factor. 

Valuation of IP assets in M&As: Recipe to compatible match-making

One of the sine qua non for a successful merger is performance of adequate due diligence and asset valuations. In asset valuations, valuation of IP assets is critical for ensuring a successful transaction outcome. This is particularly true for IP-rich companies. However, valuation of IP assets is often relegated to the backdrop vis-à-vis other valuations. The second important challenge encountered is globalization of deals. Understanding the target’s regulatory environment and cultural attitude towards IP protection becomes critical for a competent valuation. This difference emerges even more strikingly as companies come from different backdrops such as EU and Emerging Economies. Thus, IP rich companies face the twin challenge of valuation of assets and internationalization of deals which often means stepping into unchartered territories.

When transactions are IP rich, a strategic due diligence process benefits from IP intelligence and IP valuation to facilitate target identification, ranking, deal pricing, structuring, setting reserves, prioritizing later-stage “traditional” due diligence tasks and compliance with post deal financing reporting requirement.  When taken in the nascent stage, such a due diligence enables an indepth comprehension of the strategic fit, risks, value extraction; an appreciation of the target’s core and non-core IP assets. Eventually all this can facilitate post-deal IP integration and enhance the probability of realizing full value of transaction.

From the Antitrust perspective too a true determination of the value of IP portfolio is important as it determines the monopoly power ex-ante.

The general practice has so far been to make an estimate and put this lump sum value in the goodwill of the company's balance sheets. Infact even in a developed market like Europe, a recent survey indicates that only 12% of the companies involved an independent third party evaluator to value their assets.

As for the methods to evaluate, there are various valuation methods available: Cost-based, market-based, option based , income-based etc. However, valuation of IP assets is easier said then done, as the traditional methods of valuation such as market based or cost based fail to capture the full value. Another method of valuation is estimates based on past and future economic profits. Which of the models amongst these or an adaptation of them or a hybrid of one or more model best suits the valuation, depends on the particular facts and circumstances of each company as also the information available.

Nothwithstanding the challenges encountered in valuation and the difficulties faced, it is still a fruitful and worthwhile exercise as it helps the company realize the true value of its assets apart from getting a positive market response reflected in its market valuation. 

La Tomatina in Bangalore: To beat or to eat?

 Bangalore’s Palace Grounds will soon be a witness to the first ever Indian tomato festival, the Indian equivalent of the Spanish La Tomatina. Great fun throwing tomatoes, wonderful sunny afternoon in tangy red! That is only if, one has a guilt free conscious.

Look at the numbers to realize from how many hands we snatch the only meal, they possibly could have had; every time we throw a tomato to get a tingling sensation.

Officially speaking, the Tendulakar committee’s report, estimates some 37% of the population below the poverty line in India. The committee calculated the poor, based on their expenditure on food, health & education. The Arjun Sengupta report had gone on to put this number at 77% of the population living on less then Rs 20( less then one third of Euro) a day. Even the World Bank statistics have put this number at around 42%. Huge variations in numbers notwithstanding, one thing is unanimous. We are home to 1/3^rd of the world’s poor.

Now put these heart wrenching numbers in the backdrop of gloomy clouds of food crisis looming large on the horizons of the India growth story. The prices of onions, putting a mouthful of tears in the eyes of consumers is an everyday story in Indian households. Globally speaking too, food riots in Algeria, wheat prices touching the skies in UK, Mexicans speculatively buying corn to keep Tortilla prices under control, are headlines not too distant from the past.


India, officially speaking, has an over 18% food inflation every year and globally speaking, the UN Food & Agricultural Organization sees it unprecedented and all time high, on a global scale.

At this opportune moment, a plush tomato festival in the midst of this hunger and poverty in the heart of Corporate India! On one hand, the emerging corporate & IT hub talks about its Corporate Social Responsibilities and on other throws tomatoes on the face of CSR! Pretty inspiring ain’t it!?

Hungry mouths to be fed and empty hands to serve, are definitely not the inspiring backdrop for a conscious soul to throw tomatoes and have the feel good factor. As conscious citizens and the future of India Shinning, when we should be saving every bite of food and save every bit in our plates, throwing tomatoes with such careless abandon is undoubtedly, moral turpitude at best. It is not cool, but symbolic of a cold heart, blindly trying to ape the west and a culture that existed in a certain cultural context, for a certain reason. Let us not blindly ape, lest we be  relegated to the mental IQ & levels of our ancestors, the Apes.