A Case of Corporate malpractice: Khyber Agro Farms Ltd’s predatory behaviour

Khyber Agro Farms Limited- a family owned firm- is in the news again. The firm has been found guilty of selling adulterated milk. The facts about this unethical business practice are too well known to delineate these any further. The whole saga, however, raises questions pertaining to corporate behaviour in Kashmir, the business practices that firms take recourse to, and the relationship of big business(big by Kashmiri standards) to both the Government and society. It may be stated here that Khyber Agro Farms Ltd is not a corporation in the strict sense of the term. While the structure of the company is not known to us, it would be safe to presume that Khyber Agro Farms is a limited liability firm whose scale and scope is relatively large-again, by the standards of Kashmir and its market. Moreover, the company is not owned by shareholders and its capitalization does not render it to be traded public. Khyber then is not a corporation but we will, for the purposes of analysis, treats it as one. It is more in the nature of a ‘conglomerate’- not a corporate conglomerate though- given that it is a diversified firm. It owns and manages, besides Khyber Agro Farms, a hotel, a cement factory and a hospital. These diversified operations allow Khyber to make ‘supernormal profits’- again relatively speaking given the nature and size of Kashmir’s market.

The question is: if Khyber makes supernormal profits, why did the firm indulge in unethical and predatory business practice- a practice that has public health connotations? Khyber’s owners can best answer this question. We can only speculate. On the face of it, the malpractice that Khyber has taken recourse to stems from greed. The aim appears to be a perverse attempt at enhancing economies of scale against a restricted or even declining market share.  Now that Khyber’s egregious and dangerous malpractice is out in the public domain, other questions come to the fore. These appear to have been missed by the investigating agencies and by the Court.

 Khyber’s website delineates and trots out a sophisticated version of its responsibility to society and its various production methodologies but what it either obscures through this or chooses to ignore are the internal checks and balances , internal and external codes of behaviour that the firm should have. The absence of this code means that liability for misconduct is diffuse and the most that can happen is a small fine , plus a small prison sentence for the ‘face’ of the firm and a diffuse , vicarious liability for the owners. In punitive terms, this does not amount to much. What may be deleterious for Khyber is the negative publicity it has received. (Attempts appear to have been made to gag this negative publicity by buying off major media houses of the vale).

 These are the specifics of the case- an inglorious one that throws into sharp relief the business practices that major business houses of Kashmir take recourse to- all at the expense of society and its larger interests. Are there any general lessons?

 The general lesson is that businesses – small, big or corporate- do not operate in a vacuum. They exist and operate in a social context and by this very fact, they owe a duty to society. But firms are firms; their raison d’etre is profits and what flows from profits –investment, reinvestment, employment etc,- appears to me merely a mechanical concomitant to profit making. This has to and must change.  Firms- small or big- should be embedded in society. This is not to imply to dismiss the profit motive but profit maximization must be complemented by social objectives and a duty to society. Given that firms are by and large random, atomized agents- albeit interrelated with the degree of interrelatedness varying in different contexts- in the quest for profits, it would be naive to assume that firms will self regulate themselves. A regulator is needed to probe into the nature of firms’ activities and to ensure compliance with government and social standards. This regulator must have teeth but it should also be defined by a framework of checks and balances to prevent abuse of power.

The need of the hour then is a firm, powerful regulator with pre-emptive power but at the same time bound by law and a framework of checks and balances to ensure that monopoly power( whatever that may mean in Kashmir’s context), predatory behaviour and company malpractice and unethical behaviour is precluded and nipped in the bud. The Khyber Agro Firms can can serve as a bellwether which spurs authorities into action.

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