Corporate leadership: beyond the obvious

4th January 2010, ECONOMIC TIMES As a new decade dawns, the twists and turns, the rhythm and swing of the 2000s continue to reverberate. India has had, by most accounts,

4th January 2010, ECONOMIC TIMES

As a new decade dawns, the twists and turns, the rhythm and swing of the 2000s continue to reverberate. India has had, by most accounts, its best decade in terms of growth in personal income, employment and capital market returns, while America has had its worst since the 1950s. As we get ready to welcome the new year, it is opportune to reflect on the relationship that binds business and government.

The involvement of Indian business leaders in public affairs has been a longstanding tradition. By the 1880s, Jamsetji Tata had cast himself in a mould where the nation had become his main business. The founder of the Tata group was an early dreamer of “Bombay as a great city even while fox hunting was the key activity in Santa Cruz”. He provided nesting grounds for turtles in Mahad, little knowing that his successors would be unjustly accused of harming turtles in Dhamra. Jamsetji attended the first session of the Indian National Congress and supported the party’s goals (For the Love of India, RM Lala).

In his Lal Bahadur Shastri Memorial Lecture (Economic Times, December 21, 2009), Sunil Mittal argued that the debate about whether business has a part to play in nation building is by and large settled. But how much of a role should business play in the evolution of a country, and in what areas? There are many who expect participation by Indian corporate leaders in broader national affairs, in creating social harmony, minimising corruption, empowering civil society and more. Such people expect that company leaders should think well beyond profits and emulate their western counterparts. This expectation may be misplaced.

What are the contemporary concerns of citizens? I got some insight on this through data garnered from 3,500 respondents in small and big towns by the research company, GfK Mode, as part of a client study that came out in September 2009. The top three personal concerns were: education, employment opportunities and drinking water. The top three general concerns were: food prices, job loss and corruption in everyday life. Solutions to these concerns are deeply related to public policy. Most people would expect action from the government, with, at best, some help from the business sector.

Two questions arise: during the coming decade, in what field outside the immediate commercial ambit can business leaders competently influence public policy; and, do western corporate leaders contribute substantially more to their societies than their Indian counterparts?

Generally speaking, corporate leaders do not enjoy public life nor are they successful in it. Corporate leaders are trained to operate within their circle of control. Beyond this circle, they get confused or are handicapped by lack of authority. Richard Bowker, chief executive of British company National Express, says, “The outer circle is a world of utter ambiguity. For businesspeople to be successful in it, they almost have to take a sort of drug. They will see obvious and perfectly rational and logical solutions to problems. But others will see equally obvious and rational alternative solutions that are very different.”

The participation of business leaders in public affairs cannot be a panacea for inadequate delivery by government’s processes. For example, if only 25 paise in every rupee of public expenditure reaches the targeted citizen then there is a serious issue of governance. The political process and the politicians it nurtures have to make improvements in the delivery of public services through their own evolutional maturity.

Of course a planned involvement of corporate leaders in public policy can help. Beyond usual corporate subjects such as infrastructure, deregulation, financial policies and foreign investment, two topics appear on my wish list for deeper engagement by leaders and chambers of commerce: the delivery of justice and entrepreneurial freedom. They are connected.

Why does the Supreme Court not set itself any deadline for delivering judgments while chastising the lower courts for unreasonable delays? Why should it take decades for a criminal case to be decided? Why is there a continual furore that courts expedite cases involving the rich and powerful? Just as funds are allocated for rural employment and loan waivers, a suitable sum can be set aside for a more efficient justice-delivery system. I understand that under Rs 5000 crores could do wonders. This is vital in a democracy.

The second topic relates to affording more freedom to citizen entrepreneurship. The industrial fabric of India must extend well beyond big business institutions. This country has a natural proclivity for entrepreneurship of the small and medium kind. We need many more job creators than job seekers, and business leaders can play an influential role in making this happen.

The reality of western economies as democratic and peaceful entities is seen by some as the ideal to which emerging countries should aspire. Western management practices are seen through rose-tinted glasses, leading to the perception that business leaders in this superior world are more engaged in public policy matters. This is reading that is, I think, myopic. The truth is that corporate leaders in the developed world are as greedy or generous as their Indian counterparts.

Consider the evolution of democracy in the west. Up until 100 years back, Western Europe was the most dangerous place on the planet, comparable to today’s Afghanistan and Iraq. Several western countries, among them Spain, Germany and Italy, were liberal autocracies or sham democracies.

The western economic model evolved rapidly after the industrial revolution, unleashing capitalism, which in turn chipped away at the established social order by spawning entrepreneurs. These enterprising souls were able to amass huge amounts of wealth, something they would have been thoroughly incapable of doing through farming or trading.

Thus, wealth, rather than rank or hierarchy, became the entry ticket to the corridors of power. A centuries-old social structure started to break down, leading to the need for laws that protected individual liberty as well as property. It required the creation of legal rights and methods to resolve disputes. Constitutional liberalism was born in this background (The Future of Freedom, Fareed Zakaria).

The role and influence of private enterprise has also matured over the years. In the initial stages, entrepreneurs were ruthlessly acquisitive, materialistic and self-centred. Gradually, though, the situation changed. By the close of the nineteenth century, there were laws in place for worker welfare, on work hours and housing, health and sanitation. Social consciousness and corporate philanthropy would follow in this wake.

The western world has advanced through three sequential phases: capitalism (defined as an economic system based on market competition, in which the means of production and distribution are privately owned), constitutional liberalism (the protection of individual liberty, in which the rule of law regulates politics) and full-franchise democracy (an equal vote for all adults). In the evolution of democracy in India, uniquely in the world, the sequence has been different. Full-franchise democracy came to us with independence; capitalism was kept at a distance till 20 years ago; and as for constitutional liberalism, we have good laws but inadequate implementation.

The coming decade, in the circumstances, presents an excellent opportunity for business leaders to help set the public agenda for better dispensation of justice in India. Business cannot do much about speeding up the delivery of justice, but it can point out the injustice of justice being denied through delay.