Economic
Times - February 22, 2003
Arun Maira
Chairman, Boston Consulting Group, India
A global survey by Gallup has found that large
business corporations are perhaps the least trusted
institutions in the capitalist world at this time.
An intriguing finding in this survey is that India
is one of the very few countries in which business
corporations have a positive image. (The other
countries are Sweden, Indonesia and Nigeria.)
This is surprising because India is ranked very
low in other international surveys of the climate
for business investment. How does one reconcile
these seemingly contradictory views of India?
I have asked many people this question. Some
say this is a reflection of the evolution of Indian
society. In their view, public service, not business,
was the respectable path for the best and brightest
until the 1980s. Businessmen did not have a good
image.
For
example, the
sethji was often the villain in Indian movies.
All this changed when Indian society was ‘unbound’
by economic liberalisation in the early 1990s.
Thereafter to become rich became a respectable
and even admirable goal to pursue, and business
became a more respected institution in Indian
society.
However, others offer a different explanation.
They say that the values and practices of leading
business corporations in India have always been
better than elsewhere. Invariably, these people
cite the Tata Group as an example.
There is a contradiction in the two explanations.
Either business was not respected in India in
the past or it was. The fact is that some business
houses in India, especially the Tatas, have always
been respected and trusted even when business
generally was held in low esteem. They have kept
the image of business high in India.
I joined the Tata Group as a trainee in 1965,
when almost my entire class from St Stephen’s
went off to the civil services. The TAS Board
had convinced me that I could serve the nation
as well by working with the Tatas. Soon after,
I was sent on a business trip to Singapore. At
that time, travel abroad was a rare privilege
for an Indian.
I had a daily allowance of nine pounds, which
is all the Indian government would allow, to pay
for my hotel, meals and transportation. However,
thanks to the ‘all you can eat for two Singapore
dollars’ deal at Komala Villas, I could save a
little money with which to buy a large number
of gee-gaws, for a few cents each, to bring back
for the staff in the office.
I landed at Santa Cruz airport with my large
bag of gifts and a list to show that their total
cost was just under the 500 rupee customs’ allowance.
The customs agent at the airport would not accept
my word. The contents of my bag were spilled onto
the table and all the little gee-gaws were examined
before an increasingly impatient queue of people
behind me, much to my embarrassment.
The hold-up brought a customs officer to the
scene. What was going on, he wanted to know. This
person says that all this stuff costs less than
500 rupees, said the agent. The officer asked
me where I worked. I said with Tatas. “If this
gentleman says he has spent less than 500 rupees,
he has spent less than 500 rupees,” said the officer
to the agent. “He works for Tatas, and Tata people
always tell the truth”.
That
was the reputation of Tatas even then when business
people in India were generally not respected.
But values of moral integrity were not all that
Tatas were respected for. The principles by which
the Group has worked since its inception a century
ago have been described in
The Creation of Wealth, Russi Lala’s history
of the Tata Group.
Tatas pursued the creation of not personal wealth,
but wealth for society broadly. That broad society
has included the many small shareholders without
whose faith the steelworks in Jamshedpur could
not have been built. It has also included the
local communities in which the company operated.
And the customers for whom Tatas created products
in India that they could not have obtained otherwise.
And
the country also, to which Tata’s have contributed
many institutions of research and higher education.
No wonder that one or even two Tata companies
have always appeared in the top three positions
in
BusinessWorld’s surveys of the most respected
Indian companies since the inception of that survey
in the 1980s.
The Tatas have sometimes been described, pejoratively
as ‘socialists’ to distinguish them from genuine
‘capitalists’. Hy Minsky, the economist said,
“There are as many kinds of capitalism as Heinz
has pickles”. Wall Street does not seem to recognise
this though. Some varieties are stakeholder capitalism,
shareholder capitalism, and CEO capitalism.
The pendulum seems to have swung too far in the
United States towards CEO capitalism. CEOs have
been venerated in the western media as the gods
behind the success of their companies. They have
great power over their boards. And they have been
grossly over compensated. “Now capitalism has
to be saved from CEOs”, as someone put it.
Capitalism is about the creation of wealth. But
wealth for whom? The answer to that question suggests
the type of capitalist you are. The Tatas are
also capitalists, but of a different ilk to those
that are causing the breakdown of trust in business
in the west.
Tatas are not always right. But the values they
stand for have been visible in their actions over
decades.
The Aspen Seminar on the Challenges of Global
Capitalism last August was held amidst a spate
of business scandals in the US and Europe. The
seminar began with a case study of the challenge
the Tatas, a business organisation greatly trusted
by society in India, often faces in getting the
respect it deserves from business analysts seeing
the world according to US business norms.
The seminar debated many issues of global import
including poverty, the environment, and the role
of business corporations. Speaking eloquently
at the end, Shirley Williams of the British House
of Lords said, “God help us if we cannot learn
to respect institutions like the Tatas of India.”
Amen.
