August 2009

Gandhi, Governance and the Corporation

R Gopalakrishnan, executive director of Tata Sons, addressed students of the Indian Institute of Management, Bangalore on the occasion of Gandhi Jayanti to shed light on corporate citizenship and its impact on society

R Gopalakrishnan
The business world is at an inflection point. At the time of the industrial revolution, for the business world, the basis of competitive advantage was on industrial assets, physical assets. In the last 30 years, we have heard a lot about competitiveness being based on information assets, knowledge assets. As we go forward into whatever the next age will be called, I wonder whether the basis of competitiveness in the world of business will be on ethical assets.

I realise that this sounds rather pompous but I can’t help feeling that there is much evidence around us in society today that does merit exploring such an idea. After all, commerce and business are predicated on the principles of capitalism — and it doesn’t matter where in the world you go, capitalism is associated with greed, avarice, ego and these sorts of negative qualities.

Excesses have happened periodically throughout the history of commerce. Ever since the Joint Stock Company was invented in 1856, the facts of the excesses have been recorded. Today, such excesses seem to be rampant. So, at least on Gandhi Jayanti, it might not be a bad idea to reflect on what the future might be.

Two notable factors
There are two factors that we must face squarely. First, that the Joint Stock Company is here to stay as a major agent of change in social and economic development in all sorts of societies and countries around the world. Second, that there are more and more individuals in society who are driven by a set of personal values, which represent what they stand for and how they would like to work. They may work in a company that creates its own corporate environment and culture; that culture may be at variance with their personal values. They struggle to reconcile these two. In other words, there is duality, an increasing nexus between the personal values of an individual and the corporate values of the entity through which he earns his living.

These are two factors we cannot run away from, and both are important for the future. I want to narrate two episodes to illustrate these. I am going to choose a completely different arena — mountaineering — far away from business, to illustrate my point.

The mountaineer’s dilemma
In 1982, Bowen McCoy, a senior executive in Morgan Stanley, New York, undertook a six-month sabbatical which his company sponsored. As part of that sabbatical, in order to achieve greater self- awareness and knowledge about oneself, was a mountaineering expedition in the Himalayas. McCoy and a colleague of his reached the near-end and were just a bit short of the last assault on the target peak that they had set out to conquer. Following behind was a New Zealand team of mountaineers, and behind them a Japanese group. All of them had reached a very important point in the journey, the point from which the final assault would begin.

As McCoy, his colleague and the porters set out on this last leg, they heard a groan from the ice around them. They found a sadhu who was naked, ill-equipped for the minus 38 degrees at 18, 000 feet altitude. The sadhu seemed to be dying. This gave rise to a dilemma. Should we all abandon the expedition and go back with the sadhu to save his life? Should we carry the sadhu with us to the peak? Should some of us take the sadhu back and the rest go ahead with the expedition?

His individual values, which must have undoubtedly been benign, religious and fraternal, required him to save a fellow being. That task should have been put on highest priority. The group’s mountaineering attitude, laced with the competitive spirit of reaching the peak, argued that the sadhu may live or die, but they must definitely achieve their goal.

Finally they left the sadhu and went on to conquer the peak. It is not clear whether the sadhu lived or died. Bowen McCoy wrote it up as a case, which the Harvard Business School has published. It is about the ethical dilemma that this posed to him and to his colleague. McCoy has brought out the fact that until his dying day, the issue of his role in determining whether the sadhu would survive or die would continue to plague and haunt him. He was not able to reconcile his individual value system with the ambitions of the mountaineer’s value system into which he found himself.

Had the mountaineers reached a consensus through discussions on what has to be done, his conscience might have rested lighter. As it happened, they did not work out a consensus.

In 2007, there was another mountaineering episode. It was a mountain climbing event for the disabled. Participating was a double amputee, a New Zealander named Mark English. He managed to climb Mount Everest, which is quite a remarkable record. However, on his way up English found that one member of his team — there were 40 of them — called David Sharp was dying.

English had to choose between helping Sharp and going ahead with climbing the mountain. He chose to climb the mountain. His decision became the subject of great controversy on the issue of whether he did the right thing or not. So despite the great achievement of climbing Everest as a double amputee, the act became controversial on the grounds of ethics.

Values conflict
I mention these two stories because they bring out in a non-corporate context the kind of conflicts we face everyday in dealing with our individual value system and the organisational value system, about our values and the value system into which we are placed. When we operate in business, this happens all the time. My instinct tells me one thing, my company environment suggests to me another. Getting harmony between the corporate value system, which I influence through my behaviour, and my personal value system, which the corporation influences through its behaviour, is an essential part of understanding what the true nature of business is.

Business is not merely commerce; it also holds a humane aspect. The events of what’s happening around the world today do suggest that we tend to forget this. As far as Tata is concerned, we have had several experiences. In the interest of time and brevity, I will merely touch on a few aspects.

Business as a servant of society
The first lesson that I’d like to share is that business is a servant of society. It is not the other way around. Allow me to narrate an anecdote rather than become philosophical about it.

In the late 1800s, Swami Vivekananda went to Chicago to attend the Parliament of Religions. He became an ardent and outspoken advocate of human values. One of the people he met in Chicago was John D Rockefeller, who had made a great fortune in the booming oil business at the time. Rockefeller was introduced to the Swami by a friend. Madame Emma Calve, a French lady disciple narrated this episode to Madame Drinette Verdier, who has written about their meeting in her diary. That is my source.

Rockefeller probably came for a lark, meaning that he wasn’t really interested in meeting Swami Vivekananda; he had been told that a saffron-clad monk was electrifying the people of Chicago, and it is possible that he went out of curiosity. Swamiji didn’t even look up from his desk when Rockefeller entered. He continued to do his work. After a while, he looked up at Rockefeller, who was not really used to being treated like a commoner. Rockefeller took a seat and conversation ensued.

It became apparent to Swamiji that Rockefeller had lots of wealth and Swamiji posed him a question, “If you have that much more money than other people, do you think that much smarter than other people?” Rockefeller replied, “Of course.” If he wasn’t a hundred times smarter, he wouldn’t have a hundred times the money, would he? 

Swamiji left him with the thought that he may not be one hundred times smarter, he maybe just three times smarter. If he had made a hundred times more money by being three times smarter, then perhaps he was merely an instrument through which this money has to go back to somebody else. “Why don’t you think about it? And why don’t you consider leaving some of your money for other people?”

This sounded absolutely ridiculous to Rockefeller, and he departed with the polite statement that he had worked really hard to make his money, and he had absolutely no intention of leaving it to other people. But curiously, three weeks later, he came back to see Swami Vivekananda, this time of his own accord. He threw on his table a piece of paper, by which he endowed a certain sum of money — I forget how much it was, but it was small by Rockefeller’s standards — for some noble purpose. He asked the Swami, “Are you happy now that I have done this?” Swamiji responded, “Why should I be happy? You have to ask yourself whether you have left enough out of the total wealth that you have?”

It took another 15 years after this episode, that Rockefeller set up the Rockefeller Foundation in 1913, which has gone on to do an enormous amount of good work in society over the last several decades. The story illustrates the point of trusteeship. When you have earned a lot of money, whose money is it? Did that money come to you entirely because of yourself or is it possible that you are merely an instrument through which you should canalise it back to society? It is a very interesting question to ponder. I narrate this story, because the element of trusteeship comes out so clearly in the conversation between Swami Vivekananda and John D Rockefeller.

When I joined Tata 10 years ago, I learned the fact that probably the world’s first charitable trust was set up by Jamsetji Tata in 1892, a long time before the Rockefeller Trust, the Andrew Carnegie Trust, the Ford Foundation, and the Lord Leverhulme Trust, all of which came in the 1900s. I ask myself the question: what made Jamsetji Tata (who was wealthy by Indian standards of the 1880s, but probably not so by international standards) set up an instrument which was not well known or widely practiced by companies at that time — to set up the J N Tata Endowment Trust? As he articulated its purpose, it would enable talented Indians to go abroad to get advanced training so that they could return to India to work for the betterment of their country.

He was firmly of the belief that you need good people to become better and better people to become the best, if you want to advance a society. As it so happens between 1892 and today, the J N Tata Trust has sent over 3,000 Indians abroad. They include one who became chairman of the Atomic Energy Commission, another the Director General of the Council of Scientific and Industrial Research, a third the President of India. There are many illustrious alumni of the JN Tata Trust. If you take good people and allow them to become better or the best, they can play very significant roles in the national economic development of their country. I think this is another example to illustrate how business can be the servant of society.

The ulterior motive of making the profit is not merely to declare a dividend or bonus shares. As JRD Tata said, what came from the people must go back to the people. Who does the company earn its profits from? It earns from the capital given by shareholders, from consumers, by trade with vendors, from using transport contractors and so on. If it has some surplus, who does that surplus belong to? Not just to the shareholders, it belongs to whole community, the whole society.

In the global scenario, I suppose we could say what comes from the six and a half billion consumers of the world must in some way go back to the six and a half billion consumers of the world.  The fundamental characteristic of working with the trusteeship concept concerns the real purpose of business -- to return to society what you earn from society. If you are going it to return it to society, you must work with a certain attitude described by Lord Leverhulme.

Lord Leverhulme was a founder of Unilever, maker of Sunlight soap. We all are very familiar with the many brands of Unilever. He said that the task of a leader is to act with the humility of the mason who paves the roads. The man who paves the roads works with his toil and sweat; he knows that for decades after he has finished paving the road, millions of people will travel on those roads. They will travel with hope in their heart and ambition in their eyes, trying to seek out a fortune for themselves in whatever they are doing; but not once will they ever stop to think who it was that paved the road for them — that is the way it is for the mason, an anonymous servant of those travelers.

Being an anonymous servant of humanity is very much a part of a leader’s privilege; it is not his plight.

When that idea seizes leaders, then I think the concept of trusteeship leaps out at you, it makes leadership look effulgent, and it makes leadership meaningful. All of us must lay our head on a pillow for the last time sometime in our lives. It makes you realise that what you leave behind can make a big difference to someone. It is not your name or fame.

CSR at Tata
I was very struck by something when I joined Tata about 10 years ago. I used to visit various Tata units in remote locations — a fertiliser factory in UP, a hydroelectric plant in the Western Ghats, a chemical plant in Gujarat. Almost always the presentations began in the way the presentations have been made to me during my earlier career: what are the challenges that the management faces, how are they overcoming them. The unstated message was that the team was right on top of its job and the company’s interest is in safe hands. But I was struck that they always ended in a unique way — what they doing with the community around them.
 
It really didn’t matter whether there were six people in a hydroelectric power station or 60 managers in a large fertiliser factory or 6,000 managers in a large steel factory. There was always a standard ending subject — what we are doing for the community around us. I was much struck by this. To be honest, I was initially a bit skeptical. When you are in your early 50s, you tend to become a bit cynical about whether this is a public relations put-on.

As I continued to visit more units, it became clear that it could not be a put-on. I have never come across a circular from Bombay House which tells managers that their presentation must end that way. People just do it because they are genuinely of the view that their job is to earn profit for the betterment of the community. It is to them that they must return it. I think there is a wonderful commentary on trusteeship when people can actually act and behave that way rather than only make presentations; when people believe in it and they don’t have to make an effort to believe in it; when it is not a programmed thing; when they practice trusteeship because is the very reason why they are there.

I think such a situation would be the nirvana of business, it would earn business a respectful place in society, and business people can hold their head high.

The role of the CEO
The second lesson that I would like to touch upon is the role of the CEO. One of the great mysteries of capitalism and the modern media is that it has made the CEO the hero of the company. Magazines put him on the cover, and the media treat him like a hero or some in unfortunate cases, a zero. But you have to ask yourself a question: does the CEO really do all this by himself? Is the portrayal of the CEO in this manner realistic?

Is it not human then that when you see your picture, your name flashed all over, you start to believe in the mythology that you are the cause of the company’s success? It is human nature to feel flattered. We are all gods of clay and we fall into that trap.

I am reminded of a lovely story from the Bhagavat Purana. To refresh your memory, the Yadava clan to which Krishna belonged had been cursed that some day they would die by self-destruction. After the great war of the Mahabharata in Kurukshetra, the Yadavas under the leadership of Lord Krishna went to Dwarka. This is not far from Mithapur where Tata Chemicals runs its factory.

In Dwarka, the Yadavas started slaughtering each other as the curse took its effect. Therefore Lord Krishna sent an ‘SMS’ to Yudhisthira in Indraprastha, requesting that the valiant Arjuna be sent forthwith. Only Arjuna could save the situation or the Yadavas would annihilate each other. So Arjuna came in his chariot all the way to Dwarka from Indraprastha to find bedlam. He decided that the only way to save the clan was to rescue the Yadava women. That way, the clan could continue. So in his convoy, he assembled as many Yadava women as he could and he rode out of Dwarka.

On his way back to Indraprastha, Arjuna felt happy that he had saved the Yadava women and thus the clan. As he went through the countryside, the native dasyus attacked and set on the convoy. The very valiant Arjuna tried to save the women. He drew out his well-proven and magical bow and arrow; but for some reason it didn’t work this time. This great hero of many wars, Arjuna, the indefatigable Arjuna, could not overcome the dasyus. Poet Tulsidas wrote the following evocative lines, which reads like the modern CEO not being the hero.

“Tulsi narse kyaa badaa, samay badaa balwaan
Kaaravan looti gopikaa, wohi Arjun wohi baan”

(“What can Tulsi say about the greatness of man? Time is the great healer. When the caravan was being looted of the women, the same Arjun with the same bow could not overcome.”)

And this is what happens to the CEOs around the world. People who are treated as great heroes today are treated as zeros tomorrow.

Who owns the corporation?
What is the purpose of the corporation? It is to give back to society what it has earned from society. What is the role of the CEO? It is to be the ultimate servant of society. It is not that he does it all; the sweat and the labours of the many hundreds of thousands in the company cause the company to achieve. The leader’s job is to communicate with them. But it takes a superhero to actually downplay his own role and promote the idea that he happens to be the trustee of the efforts of all the people who work for him and help the company to do so well.

One of the notable things about Tata is the shareholding pattern. It allows Tata to do the right things in the right way with an eye on the long term. Tata companies are promoted by a company called Tata Sons, a private and unlisted company. Thus the parent company is unlisted, while the son and the daughter companies are listed, such as Tata Steel, Tata Consultancy, Tata Motors, Tata Chemicals, and Tata Power and so on.

And so there are some three million shareholders of the son-companies and the grandson-companies and the great grandson-companies. The principal shareholder of the parent holding company, Tata Sons, is a clutch of charitable trusts. Recall that Tata Sons is worth billions of dollars. Therefore I think the structure of Tata’s embeds certain values, which you either practice or you do not belong.

It gives you a sense of humility and humanity, whereby you can run the company and yet try to be a servant of society. If that can be imparted and translated across as many Tata companies we have, it is quite significant. I get up and go to work every morning, fighting to get every single extra rupee or dollar of profit to the extent of my influence or position. There are 350,000 other people doing the same thing. We do this because those two-thirds of the extra dollar go to charity.

After we are gone, when we finally go to St Peter, we may have something to say for ourselves and that is a help!

I wish all of business could adopt one or other of the trusteeship models.

Tata is trying to spread these ideas to companies that they acquire around the world. I can tell you one thing: it is electrifying and captivating to them. I have talked about this concept of trusteeship and the way Tata has practiced it to the managers of our acquired companies in Detroit, in Northwich, UK and in Singapore: they just don’t believe that this is possible. Gradually the penny drops that it is a very rare and unique kind of organisation that is actually doing this.

I would hope in the course of time that it will increase people’s commitment that business can be humane and need not be an inhuman pursuit of greed.