Saturday, 20 December 2008
Book Review: Maria Misra’s Business, Race, and Politics in British India
I came across this wonderful book while trying to learn a little bit more managing agency houses which dominated Indian industry prior to independence and for a brief while after that. I heard the term ‘managing agency’ for the first time over 12 years ago while attending corporate law lectures as a law student in Bangalore. ‘Managing agency contracts,’ our highly respected professor told us with uncharacteristic brevity, ‘are banned. BANNED. Companies are not allowed to enter into such contracts any more.’ His eyes conveyed a sense of horror as if managing agency contracts were something very disgusting and dirty, akin to may be the slave trade, as if he could never explain to us youngsters, how horrible a managing agency arrangement was. We students left it at that, not particularly wanting to inquire into something not very relevant for us and add to our workload. The second time I came across the term managing agency house was when reading Vikram Seth’s A Suitable Boy, the best book about India I have read so far. One of the characters in the book, snooty anglophile Arun Mehra, works for a managing agency house. Seth takes some trouble to explain to the reader how a managing agency house functioned and how elitist and exclusive it was, even after India’s independence. However, even Seth does not manage to explain how managing agency houses dominated Indian industry during the British era. Maria Misra manages to do what neither my professor nor Vikram Seth could do (to be honest, they didn’t try to do so), that is, to convey to her readers an image of British India dominated by managing agency houses.
To explain in simplistic terms, a managing agency was a partnership which carried on the business of managing other business enterprises. A typical managing agency would enter into contracts with various companies for managing them. Under Indian company law, as it existed then, shareholders of a company could not challenge or override such contracts, even if they were contrary to shareholder interests. British India was dominated by 60 or so managing agency houses which controlled and managed most Indian businesses. The usual modus operandi for managing agency houses was to start an enterprise with their capital, execute a managing agency contract with it for a term of twenty or thirty years and then issue shares in the company to investors, who would be stuck with the managing agent.
These agencies were run by British businessmen, both English and Scottish, who believed in the racial superiority of the British over Indians, who epitomised the values around which the Empire was built and the ‘white man’s burden’ was discharged. Much more conservative than even the British Indian government, they were at the zenith of their dominance before the beginning of the First World War. Misra explains in detail how these managing agency houses refused to change with the times and eventually lost out to multinational and Indian owned firms.
Misra’s book is crowded with statistics. Misra tells us that senior assistants at these managing agency houses made INR. 3,500 per month, a huge amount of money for those days. Partners would typically retire with a fortune of around £60,000, whilst senior assistants could squirrel away an average of £30,000. Managing agencies paid their employees more than what the Indian Civil Service paid.
The managing agents believed that the ideal businessman was a generalist, who would not be too ‘technical’ and who could take a holistic view of the business and its prospects. Technical people were distrusted. As technology advanced, managing agents began to lose out on account of their technical incompetence. Misra gives us the example of Gillander, a leading managing agency, ordering railway engine paint which wouldn’t dry in the Indian climate for Duco Paints (an ICI subsidiary). Prudential, an MNC fired its managing agent since it did not understand the insurance business.
Managing agencies had so much contempt for Indians and their lack of ‘character’ that they refused to Indianise even after the Indian Civil Service started to do so. Few Indians were said to have the ‘character’ required to be a manager, with the exception of the Parsis. Indians were said to make good accountants and their rote learning skills gave them an unfair advantage in academic exams, though it was not of much use in real business. Frank Russell, a Calcutta businessman, took the view that Hindus had more brains that Muslims, but did not compare in character or physical courage. N. Macleod, a business witness to the 1913 Public Services Commission said that ‘instead of choosing men who are merely a bundle of bones and book-learning, the selectors should give preference to those men whose physical stature and appearance who be in keeping with the dignified and important position they are likely to be called on to fill in India. There is after all in the administration of Eastern countries, a great deal to be said for the man who looks the part.’
When an Indian businessman by the name Birla invited Basil Eddis of Gillander to join the Board of one of his cotton mills, the offer was coolly declined. When another India business house by the name Tata invited Gillander to collaborate with it in the production of steel, the offer was turned down. Misra’s book is filled with interesting anecdotes such as these. The most interesting aspect of the entire managing agency business was that managing agency contracts were void under English law whilst they were enforceable in India – until 1970.