The business elite’s moment of reckoning

Our business elite need to actively engage in a wider conversation about a new India. Instead of merely obsessing about GDP growth, business leaders need to speak out openly about our lopsided economic model

Indrajit Gupta

[Photograph by akshayapatra under Creative Commons]

India’s 70th Independence Day is just a few weeks away. It is an opportunity as good as any to reflect on the kind of society and nation that we’d like to see. The events of the last one month alone—led by Brexit and Turkey—have given us enough reason to pause and ponder over the state of the world.

Even before we get there, already, there’s much hoopla and hype being generated over the 25th anniversary of our liberalisation programme, kicked off by the then Prime Minister Narasimha Rao and finance minister Dr Manmohan Singh. Sure, there’s much to celebrate. After all, it helped unleash the entrepreneurship genie that had been bottled up for many decades.

In our key economic and business centres across Delhi, Mumbai and Bengaluru, there’s plenty of chest-thumping about our GDP growth rates, that make us one of the fastest growing economies in the world. Yet income inequalities are rising faster in both India and China than anywhere else in the world. So-called trickle down models of economic growth aren’t delivering results. So while some of our biggest billionaires in India build opulent, palatial homes for themselves, we are still a long way off in pulling out large parts of our society from abysmal levels of poverty, malnutrition and ignorance. Jobs are scarce for the 12 million young minds who enter our workforce every year. And those are becoming the potential breeding grounds for terror and violence in our society. Nearly one-third of our country is under the control of the Naxalites. Instead of fixing our primary education and basic health systems, we seem to be more obsessed about whether Nehru pops in our textbooks far too often. And when Raghuram Rajan initiated the conversation about prioritising structural reform in our banking system over merely chasing economic growth, look at how that debate panned out.

We need our business elite to actively engage in a wider conversation about a new India. Instead of merely obsessing about the GDP growth and lower interest rates—and the trajectory of our economic growth—we need more business leaders to speak out openly about our lopsided economic model. Even if they feel strongly about such issues, most prefer to keep quiet, for the fear of alienating the powers-that-be in the government. It’s perhaps time to shed some of those inhibitions and help frame the debate about how business can be a more credible and effective partner in social change.

Meanwhile, management theory is itself undergoing a transformation. As Harvard don Michael Porter once told me in an interview, traditional management theories have tended to be too simple, too narrow, and haven’t quite recognised new ways of working with society. In India, we inherited the American model of capitalism, with all its ills. Primary among them is the focus on short-term, quarter on quarter results and its deleterious impact on pursuing innovation and building companies for the future. Listen to this insightful conversation between Disney CEO Bob Iger and venture capitalist Mark Andreessen at an event hosted by Vanity Fair last year. (Tune into Iger sharing his experience and frustration as a CEO of a public company and about speaking honestly to Wall Street—between 09:34 to 16:55 minutes in the video.)

Today, like Iger, many leading lights from the world of business are speaking out against this system. Unilever’s Paul Polman has been advocating the need for more inclusive, sustainable business strategies and jettisoning the quarterly reporting model. In this interview with The Guardian way back in 2012, Polman was scathing of companies that claimed their hands were tied by fiduciary duty to maximise profits for shareholders in the short-term, arguing that this is “too narrow a model of Milton Friedman's old thinking. The world has moved on and these people need to broaden their education with the reality of today’s world.”

He went on to say: “I don’t think our fiduciary duty is to put shareholders first. I say the opposite. What we firmly believe is that if we focus our company on improving the lives of the world’s citizens and come up with genuine sustainable solutions, we are more in synch with consumers and society and ultimately this will result in good shareholder returns.

“Why would you invest in a company which is out of synch with the needs of society, that does not take its social compliance in its supply chain seriously, that does not think about the costs of externalities, or of its negative impacts on society?”

In India, in the past few years, the ideas around the role of business in society hasn’t stirred enough robust debate. The earlier government’s decision to force corporations to spend a minimum of 2% of profits on corporate social responsibility (CSR) generated considerable heat and dust around 2012-13. With the new National Democratic Alliance government, it isn’t quite clear if the idea still finds favour. Either way, the fact that a company would have to be taken to the altar of CSR kicking and screaming, and being forced to spend on CSR because of legislative pressure is hardly encouraging.

It takes self-enlightened corporations to realise that the rules of business are being reset. And that’s where Porter’s shared value framework comes in handy. It suggests that the best way for a business to have an impact is to see the business as a business, which is able to innovate and find ways of developing products that meet the needs of the community it serves. So the measures of business performances don’t change. What changes are the tools and techniques that are used to generate returns, growth and productivity. For instance, Porter says that for the next 20 years, any company that is not exquisitely efficient in the use of energy will be in trouble. Already, a few analysts are gradually starting to look at the use of energy, water and resources. They will look at how companies penetrate non-traditional markets and look at customers’ needs that allow the business to grow, he said.

So far, the public may have had a very limited view of business. Stories of crony capitalism, regulatory capture, governance failures and unending business scams have dented society’s trust in business. Yet there’s a lot that businesses can do to solve societal problems, if they articulate a higher purpose and decisively act on it. Many employees who feel suffocated by this narrow view of business are likely to rise up to the challenge of delivering on a higher purpose. There are enough opportunities in not just healthcare and education, but in practically every market space to apply this shared value thinking.

So what will it take to bring about a mindset change? I believe it calls for an entrepreneurial mindset, loads of creative imagination and open source innovation models. And it needs pragmatic business leaders, like Azim Premji, to stand up and remind us about the role that that the business elite can play in helping build a new India. Will they speak up?

(A shorter version of this article appeared in Business Standard)

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About the author

Indrajit Gupta
Indrajit Gupta

Co-founder and Director

Founding Fuel

Indrajit Gupta is a business journalist and editor with over two decades of experience. He was the Founding Editor of the Indian edition of Forbes magazine. Within four years of its launch, Forbes India became the most influential magazine in its space.

He is the co-founder and director at Founding Fuel.

He has served in leadership positions at many of the leading media brands in the country. Before taking up the assignment to start up the India edition of Forbes magazine, Gupta was the Resident Editor of The Economic Times in Mumbai and before that, the National Business Editor of The Times of India.

Over the years, Gupta has built a reputation for grooming talent and creating highly energised and purposeful newsrooms. He has interviewed several leading global thought-leaders and business leaders including CK Prahalad, Ram Charan, Wayne Brockbank, Sumantra Ghoshal, Carlos Ghosn and Nitin Nohria, and also led cutting-edge joint research-based projects with McKinsey & Co, The Great Place to Work Institute, Boston Consulting Group, KMPG and Coopers & Lybrand.

He won the Polestar journalism award in 2010 and was awarded the Chevening fellowship by the British Foreign office in 1999. Gupta is an alumnus of the SP Jain Institute of Management and Research, Mumbai and a B.Com (Hons) graduate from St Xavier's College, Calcutta.

Gupta teaches a course on Business Problem Solving at his alma mater. He writes a column named Strategic Intent in Business Standard’s edit page. He lives in Mumbai with his wife and two young daughters.

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