The benefits and drawbacks of working in finance for a publicly traded/listed company in India

Ok I admit it. The title is a blatant effort to win some SEO brownie points. But thats par of the course these days, and given the uniqueness of this topic (I hardly found any relevant links), I thought I would write on this subject, from personal experience, and also from interactions with other finance professionals. Firstly, some background on what distinguishes a public listed company from other companies?

• Minority shareholders: These are often the very reason for a listing, and to ensure liquidity in trading, Indian stock exchanges mandate a minimum 25% free float i.e promoter shareholding capped at 75%. Not coincidently. key corporate actions in India require a special majority i.e 76% of shareholders to approve matters, but since this % is calculated on those shareholders present and voting, 75% or a much lower shareholding is often enough in practice. That said, minority shareholders have a veto on certain related party transactions and actions, so one cannot ignore them. 
• Periodic reporting: Quarterly reports in addition to annual reports, within the stipulated timeline of 45 days/60 days
• Internal Financial Controls certification: For listed companies, there is a CXO level certification with stringent penal liabilities if proved wrong. Hence, the demand for a robust finance controller who can keep the CXO from jail 
• Voluminous disclosures/ Multiplying non financial reporting Be it CSR, ESG, BRR, IND-AS, IFRS..listed companies are often the first guinea pigs of financial and non financial reporting since they are public interest entities. This can prove a burden to report all this.
• Independent Directors/Audit Committees: For listed companies, there are mandates to have a certain proportion of independent directors, over and above that stipulated by the Companies Act 2013. These additional stakeholders bring new perspectives, but could also challenge management in a manner not to the former's liking

Why do I single out the finance function here? While all functions experience a (hopefully) more stringent control environment, it is the finance and legal functions whose stewardship role increases here.  The difference being clear (hopefully), let us now see why a listed company would be preferable to a finance professional, and why sometimes it may not. Firstly the pros

• Independent Audit Committee (in theory)
• Better controls
• Multiple audits/certifications
• Multiple professional interactions
• Exposure to handling minority interests
• Investor Relations: This is a unique role in public traded companies, since even private equity companies would have more of internal MIS than an extensive IR engagement. Preparing IR decks, financial press releases, stakeholder mapping
• AGM/EGM: This is a JV between Finance and Secretarial functions, however every finance professional should get involved in the preparation for an AGM of a listed company atleast once so that they appreciate the extent of background effort
• Strategic disclosure drafting:Strike a balance between disclosing more to please investors and win awards, versus revealing business model insights.

The cons however could be

• Non value adding work: Be it reviewing an annual report for the nth time before review despite the knowledge that it will likely not be read by even 0.1% of investors, getting backup certifications/attestations for the comfort of independent board members
• Disclosure overdose: Not all reporting is likely to help investors(eg BRR) but is mandated and wastes man-months in its preparation
• Potential Legal Liability: If you are a victim of management override(possible if other functions have 'promoter appointed' people-like a 'Lala company'), you are still presumed to be culpable unless due diligence is proven: 
• Dealing with controlling shareholder-ethics: The controlling shareholder/management is the on
• Hierarchial/Ladder-Big company woes: Listed companies usually tend to be large profitable entities (when initially listed atleast). So the issues of 

Overall, it is for one to map their stage of career, aspirations

The benefits and drawbacks of working in finance for a publicly traded/listed company in India

Ok I admit it. The title is a blatant effort to win some SEO brownie points. But thats par of the course these days, and given the uniqueness of this topic (I hardly found any relevant links), I thought I would write on this subject, from personal experience, and also from interactions with other finance professionals. Firstly, some background on what distinguishes a public listed company from other companies?

• Minority shareholders: These are often the very reason for a listing, and to ensure liquidity in trading, Indian stock exchanges mandate a minimum 25% free float i.e promoter shareholding capped at 75%. Not coincidently. key corporate actions in India require a special majority i.e 76% of shareholders to approve matters, but since this % is calculated on those shareholders present and voting, 75% or a much lower shareholding is often enough in practice. That said, minority shareholders have a veto on certain related party transactions and actions, so one cannot ignore them. 
• Periodic reporting: Quarterly reports in addition to annual reports, within the stipulated timeline of 45 days/60 days
• Internal Financial Controls certification: For listed companies, there is a CXO level certification with stringent penal liabilities if proved wrong. Hence, the demand for a robust finance controller who can keep the CXO from jail 
• Voluminous disclosures/ Multiplying non financial reporting Be it CSR, ESG, BRR, IND-AS, IFRS..listed companies are often the first guinea pigs of financial and non financial reporting since they are public interest entities. This can prove a burden to report all this.
• Independent Directors/Audit Committees: For listed companies, there are mandates to have a certain proportion of independent directors, over and above that stipulated by the Companies Act 2013. These additional stakeholders bring new perspectives, but could also challenge management in a manner not to the former's liking

Why do I single out the finance function here? While all functions experience a (hopefully) more stringent control environment, it is the finance and legal functions whose stewardship role increases here.  The difference being clear (hopefully), let us now see why a listed company would be preferable to a finance professional, and why sometimes it may not. Firstly the pros

• Independent Audit Committee (in theory)
• Better controls
• Multiple audits/certifications
• Multiple professional interactions
• Exposure to handling minority interests
• Investor Relations: This is a unique role in public traded companies, since even private equity companies would have more of internal MIS than an extensive IR engagement. Preparing IR decks, financial press releases, stakeholder mapping
• AGM/EGM: This is a JV between Finance and Secretarial functions, however every finance professional should get involved in the preparation for an AGM of a listed company atleast once so that they appreciate the extent of background effort
• Strategic disclosure drafting:Strike a balance between disclosing more to please investors and win awards, versus revealing business model insights.

The cons however could be

• Non value adding work: Be it reviewing an annual report for the nth time before review despite the knowledge that it will likely not be read by even 0.1% of investors, getting backup certifications/attestations for the comfort of independent board members
• Disclosure overdose: Not all reporting is likely to help investors(eg BRR) but is mandated and wastes man-months in its preparation
• Potential Legal Liability: If you are a victim of management override(possible if other functions have 'promoter appointed' people-like a 'Lala company'), you are still presumed to be culpable unless due diligence is proven: 
• Dealing with controlling shareholder-ethics: The controlling shareholder/management is the on
• Hierarchial/Ladder-Big company woes: Listed companies usually tend to be large profitable entities (when initially listed atleast). So the issues of 

Overall, it is for one to map their stage of career, aspirations

How to choose a job-some tips for the finance professional

For finance professionals(whether they be CA, CPA, CFA,FRM, MBA, CS, CWA etc), the difference between others and them is that they owe a duty of care to the public and to their employer. They are not supposed to be mercenaries out for maximizing the buck(though many do). Recently, I have had the fortune to advise some younger folks on choosing between options, so I thought to pen down my thoughts here

1. Remuneration
1. Starting Compensation(Stated)-What is the Gross CTC? This will often be the basis of negotiation of your next job-even if not all of it goes to you? 
2. Post Tax CTC(net of all perks) -Is the post tax CTC something acceptable to you? If you lose something due to inflexible tax structuring(eg No NPS/No car hire), then you should negotiate to ensure this stays flat
3. Growth Philosophy-Typical CTC hikes given at different rating scales. Also what extent of jump happens after one stays a long time? 
2. Alignment with your long term plans-Assuming you perform at previous levels, will this role leave you better placed to pursue your ultimate objective? 
3. Working Hours
1. Official Hours-How many hours are you expected to clock in per day? How many did the earlier incumbent do? Does the company value face time beyond output? 
2. Working Days-Whether 5 day week or 6 day week
3. Flexi timings-Whether you can structure your hours the way you like(subject to outside meetings)
4. Commute times-Very Relevant to those in Mumbai, Bangalore etc where traffic often eats up 10% of the total hours in a day
4. Your role/place in hierarchy
1. Matrix vs Single reporting-Do you have ONE boss or TWO bosses? How many power centres are there relevant to you(eg CFO and CAO)
5. Leadership Oppurtunity
1. Reporting Manager-If you are a reporting manager responsible for somebody else, it helps you develop leadership skills
2. Project Management-Even if you are not a reporting manager but need to demonstrate project leadership skills as an individual contributor, that is a good way.
6. Working Conditions
1. Physical Offices-Are the offices comfortable cubicles and designed for peak performance? Is this is a place you can avoid getting tired? Not all places can be a Google but they can certainly be comfortable.
2. Flexibility-Possibility to work from home
3. Tech/Automation-Mobile based work applications, shared services helpdesk etc. These all make one's work easier.
4. Employee Friendliness-Leave Policy, extent of trust in employees
7. Learning/Development-What oppurtunities would you get to hone your skills and management
8. Business Model/Industry
1. Win-Win Is this a win-win business model for society? Or does the company harm society(aka sin stocks) within your moral framework? If so, cognitive dissonance might eat you up and/or regulation may destroy the company
2. Industry Growth-What is the industry growing like, and is your company winning or losing market share? These two answers often determine compensation and internal oppurtunities. 
9. Intellectual Stimulating Work
1. Work-Is the work something appealing to YOUR interests and skills? Would you do this even if you had 'FU money'? 
2. Colleugues-Would the people be of an appropriate intellectual level? For some people used to working only with other smart MBAs/consultants, it becomes a shock when exposed to multiple intelligences of others
10. Performance Review framework
1. Frequency-Are you someone who performs day in/day out? Or are you someone who ca hit 6s at the slag overs? Either way, the performance mechanism matters-some people perform well with structured goals(3+1s), others on projects and perception
2. Bell Curve-While the gold standard so far, many organizations no longer have a bell curve. These would be interesting for those desiring a truly 'win-win'
11. Integrity
1. Tone from the top-Is there a culture of 'Zero tolerance' or is it 'Results at any cost'? What is your risk of going to jail/being disbarred(eg Satyam CFO and some junior team members)
2. Pressures at your role-Certain roles(especialy sales, financial reporting) have unsaid presures to cook numbers which is often a long standing practice. To what extent can you withstand it, and how ethical is your company vs what you are used to
12. Talent Management Framework of the organization
1. Build or Buy-Some organizations recruit at junior levels only and then promote only from within. Such organizations are good to build careers. While others recruit from outside at all levels and hence if you are siloed there, you might not find a fit in some years either inside or outside. Think which one is your future employer
2. Leadership Programs-Certain Indian conglomerates and MNCs depend heavily on their long established leadership programs(TAS/ABG/UFLP/Airtel YLP etc). Would you be disadvantaged by lateral entry and if so to what extent? Can you accept being possibly a '2nd level citizen' across
3. Job Rotation-Is there a formal job rotation/Internal job posting policy? And more importantly, is there just lip service or is this done? 
4. Mobility-Some organizations insist on mobility at all levels and often across functions/locations, as a condition for progress. Are your personal circumstances such to accomodate this, or would you be constrained to walk away after establishing equity? 
5. Career Path-Is there a structured career path? Or is it a jungle gym that performance establishes it all? 

Should retail investors stick to value equity investing to safeguard careers?

When I refer to 'retail investor', I do not imply any maximum level of knowledge/skill/expertise/experience, but only refer to a person who does not intend to make investing his full time profession. Hence, even a MBA Finance from a top notch college who aced his investing courses/simulation games, would be a retail investor if the main job is anything other than full time investing. Now, there are many investing styles for the lay investor, and in comparison to derivatives, exotic asset classes like art/commodities etc, the slow compounding effect based conservative value investing style may not appeal to many people, atleast not in the short run. But the perils in any other investing style is(especially the last point)

1. Disadvantaged in terms of information recency/execution speed and costs:-Without multiple terminals, access to recent data feeds and cheap trading costs, a retail investor is disadvantaged compared to his institutional counterpart. 
2. Information asymmetry widening:- In equities, the level of analysis is much lesser(DCF etc) as compared to options/FICC wherein pricing models accuracy matters as well. The improvements/refinement in those areas are much more prevalent and frequent, hence someone not having access to those would be at a disadvantageous position.
3. Limited structures/market access/positions:-Institutions by virtue of their market access, lower margin needs and liquidity can access more markets than retail investors, who are therefore better off investing along with them via structured notes/fund of funds etc.
4. Distraction from 'core'/'ongoing' business/career:-My father's friend who has a ball bearings business and who dabbles in stocks, once confessed that if he had focused on his bearings business, he would have been much wealthier than he is today. This is much more true in professions, with an entry of young often better trained blood. If you are not on your toes/upto speed, there is risk of permanently being left behind. And that is an intangible damage which no amount of investing success can compensate for. For day trading, F&O etc, that needs a lot of time commitment/intra day distraction and BP/pulse rate tracking the market. That does take a toll on one's performance at work. 
5. Value investing inherent advantages:- By contrast, value investing needs a one time major time investment, and then not so much effort at monitoring. Also, it is not very time sensitive job, so does not affect your work performance. Plus, the playing field is much more level(in fact retail investors even have an advantage as they do not need to report to someone/less herding risk etc). 

Of course, to 'get rich fast', it either needs a great career with bonuses, or else great trading gains/informed investing. While selecting the path, one would be advised to consider the above points.

Why no one wants to work in a factory anymore

Yesterday, I went to a well known synthetic fibres plant on the outskirts of Mumbai. This plant, owned by a premier Indian business group, had seen its haydays in the 80s. But now, with expansion planned elsewhere in India (Uttaranchal, Rajasthan etc), there's a recruitment freeze. New workers are taken on a paltry sum on contract basis, and made permanent after 5 yrs. No wonder then, that even a low paid worker wishes his children to do anything but follow in his foot steps.

Of course, people are still dying for work, and the 'no one' whom I refer to would be the English educated(not necessarily English speaking!), cosmopolitan metro living generation. A B.Sc prefers to work at Wipro rather than be a chemist at a factory. The pay differences are stark, but what is even more compelling is the sheer 'shame' of confessing to your friends that you work in a factory.

A friend of mine got placed at Asian Paints straight out of IIT JEE, and was desperately hoping for a change. Residing on the outskirts of Mumbai, he had little enthusiasm in telling all and sundry that he would be working at Bhandup/Ambernath. While his story had an happy ending(he got into one of India's best Bschools), this is not true for everyone.

Do process poor companies pay their people higher?

The title would seem quiet controversial and academic, so let me clarify my stance. I have empirically noticed that as the maturity of an industry improves, the average compensation falls. While this may be attributed to lower profits, the reason according to me is that as the process maturity goes up, the value added by the individual employee is lower. No wonder then, that organization stress 'process' and 'knowledge capture' and are wary of the lone ranger. Below are the examples I adduce in support of my theory

• Investment banks and consulting firms are very profitable, but explicitly put their people over process, this increasing their dependence on stars. While retail banks/commercial  have refined their processes to such an extent that nobody is indispensable. This in my view is a contributory factor to differential pay.
• New entrants in a market pay supernormal wages to lure established people from their competitors, to set up processes/systems. This is another form of substituting people for process in the short run. 
• IT companies used to be the best paymasters in India till their process maturity attained stellar heights. And then they realized that they could easily find people to fit the process. Hence, expanding the talent poor(Wipro hiring B.Scs, training) became the option to offering huge salaries to poach. 
• Market leaders(HUL, TAS, HDFC etc) are rarely the best paymasters. In fact, they deliberately benchmark themselves at lower than 100 percentile of industry pay, because they feel they are giving valuable training in return.  

This topic seems interesting enough to do a time series analysis-maybe it already has been done before. But the takeaway from this is that before career decisions, take this factor into account as well.