Nepali Times
Strictly Business
Shareholders vs stakeholders


Last week, a multinational consumer goods company shut down its operations after being in Nepal for 11 years. Deciding to move to India, Colgate Palmolive blamed both chronic labour problems and dwindling sales of its products in Nepal.

What was striking about the company's announcement was how little media attention was paid to the company's plight. The FNCCI did not rally in support of the company. Labor union leaders did not bemoan the loss of jobs or wonder aloud how more jobs are to be created when multinationals leave the country in a steady stream one after another.

At a time when the finance minister says that he wants, however improbably, to make it easier for foreign investors to come to Nepal, this company's departure throws ice water on the minister's plans. And it's tempting to use this example to further blame our politicians and the policy-makers for continuously failing to create an amenable business climate for domestic and foreign companies to thrive in Nepal.

But what if we say that despite the opportunity that Nepal offers in terms of a young, growing population, relatively inexpensive labour and access to Bihar and Uttar Pradesh markets, sometimes it is the companies who may have themselves to blame for their own departure? They go overboard to please their shareholders around the world, but bungle dealings with their stakeholders in areas where their factories are located.

Despite the anti-multinational rhetoric of Nepal's left, the fact is that most Nepali managers covet jobs at multinational companies. All things being equal, multinationals pay higher salaries, offer better benefits, bring in international standards and qualities to ways of working, and are more regular about sending staff away to training programs in and out of the country. For upwardly mobile Nepali professionals, post-MBA jobs with multinationals offer instant prestige and influence.

Their bosses are usually expatriates, who stay in Nepal for a few years, which are spent, not surprisingly, on improving the bottom line. If profits go up during the tenure of a particular country manager, his (and it's usually a he) career graph goes up within the global company. If profits go down, then, his career will not do well.

The big boss's incentive is such that he does the relatively easy part of raising revenues with a lot more energy. But he does not usually spend much time engaging deeply on strengthening relations with the communities of stakeholders: labor, ex-employees, NGOs, trade unions, media, vendors, suppliers, farmers, politicians and policy-makers. Even when he does meet them, the meetings have either a perfunctory, even superficial, feel to them or the phrase "desperate crisis management" hangs in the air. Needless to say, such interactions do not inspire long-term trust and confidence.

That is why, instead of rushing to blame Nepal for all the problems, the burden of which, let us not forget, are borne by all domestic companies as well, the country heads of multinationals in Nepal need to widen the lens
of how they view business opportunities in both the short- and the long-run. And that means learning to engage openly and iteratively with the local stakeholders even when such engagements do not add any immediate number to the net profit figure.

Sure, pleasing shareholders offers immediate job-related rewards. But doing that well, while earning the honest respect of the local stakeholders offers both themultinational and its management a recipe for continuing to do well in admittedly problem-ridden and rife-with-uncertainty countries, such as Nepal, in years to come.

(11 JAN 2013 - 17 JAN 2013)