Climbing the ladder of business responsibility: A time for real leaders to show up

True business leadership lies in pursuing a higher purpose than merely obtaining a larger monetary valuation of the business

Arun Maira

[Image by Gerd Altmann under Creative Commons]

Several Indian writers, artists and filmmakers have expressed their anguish with the divisiveness being fanned within India by some political forces. As concerned citizens they believe it is their duty to protest. When Moody’s, the financial ratings agency, expressed its concern that societal tensions will throw sand into the wheels of India’s economic progress, senior Indian officials told Moody’s to stick to its business and concern itself with the economy only. Some Indian business leaders also warned against hate-mongering by political leaders. Did they have a duty as citizens to speak up on what had become a politically contested matter? Or should the business of business be only business?

These questions about business responsibility had also come up after the riots in Gujarat in 2002. Some business leaders had spoken up then. Reacting to them, a political leader wondered why industry was making a noise then when it had remained silent when Hindus were driven out of Kashmir. Similarly, Royal Dutch Shell was accused of complicity by remaining silent when the Nigerian government executed the activist and author Ken Saro-Wiwa in 1995. Shell was in a quandary at the time. Its business philosophy was to be a good corporate citizen by working in partnership with national governments everywhere. But what if the government is not effective in protecting human rights? According to Shell’s critics, the company should have stood up for what was right in Nigeria even if its business suffered.

Following the Gujarat riots, public discourse became very heated. The All India Management Association convened a meeting in Mumbai of business leaders along with civil society leaders and government functionaries. About 100 people participated. A rule was set for the meeting. There would be no partisanship, and no discussion about who had done wrong. The purpose of the meeting was to provide business leaders an occasion to reflect on the role of business in society. I was asked to facilitate the meeting. Deliberations in the meeting produced the concept of a ladder of business responsibility up which business leaders must climb.

The first rung is accountability to investors and lenders—the financial domain; the domain of corporate accounting, auditing, corporate law, and stock market regulators—which is the principal focus so far of ‘good corporate governance’.

The second rung is accountability to the direct participants in the business’s financial value creation process—customers, employees and vendors; the domain of consumer protection, labour laws and commercial contracts. Along with the first, this is the principal focus of good business management.

The third rung is accountability for the effect of business operations on the physical environment; the domain of environmental regulations.

The fourth rung is accountability for the effect of the business’s products and processes on the lives of people—their health, their education, their values.

The fifth is accountability for the political health of the societies in which businesses operate—human rights, fair democratic practices, etc. This leads to the question of the responsibility of corporations as political citizens in their societies. Are they merely takers of permissions from society or also creators of fair conditions? Corporations have acquired the rights of citizens in society: rights to property, rights to protection under law, rights to sue the government and others. With rights, should they not have responsibilities, like every citizen, for building a good society?

The most simplistic interpretation of the nostrum that the business of business must be only business is: the role of business in society is to run profitable operations and create value for shareholders. Associated with the ideas of free markets, freedom for businesses, and minimum government, this became the dominant paradigm since the 1990s. At the same time another set of ideas acquired great force in global governance. They are ideas about the governance of the entire global system of which everyone—individuals, businesses, and nations—is only a small part. These ideas were translated into the Millennium Development Goals in 2000 and then to the Sustainable Development Goals in 2015. Realization is dawning that everyone, including businesses, must act to improve the ‘commons’ they all share—the natural environment, as well as the quality of society including human rights and justice.

Leaders of successful business start-ups sometimes wax eloquent about how they motivate their employees. They say that they urge their employees to find true meaning in their lives. They say their enterprises enable employees to fulfil their life purposes. Lofty statements indeed. What about the leaders themselves? What is their life’s purpose? To make more money for themselves and their investors? Or to make the world better for everyone? Societies needs new scorecards to measure the worthiness of businesses. And business leaders need new yardsticks to measure societal values, which they do not even think about, and often destroy, in their drive to create more shareholder value.

When leaders must stretch to reach higher rungs on the ladder of business responsibility, India’s new corporate social responsibility (CSR) law is pulling them down. India’s retrograde CSR law demands that businesses spend a small portion (2%) of their net profits to fulfil their social responsibilities. It does not ask how these profits were made, and whether or not the products and processes of the business had harmed the community and environment. Going further downhill, the government is asking businesses to pass on their 2% CSR money to the government for its programmes. Thus the concept of business responsibility has degenerated into a small additional tax on business rather than the way for each business to discharge its own responsibilities to society. The responsibility of business to society stays on the lowest rung of the ladder. The business of business remains the making of money. It is much easier to sign a cheque than to look into one’s conscience and change one’s behaviour.

Leaders venture where others have not. It is easier to stay lower down, in well traversed territory. Higher up the air is rarer, and the ladder goes into clouds where it is not easy to see the way. Speaking truth to power is risky. Real leaders stick their necks out. They take risks in pursuit of a purpose higher than merely obtaining a larger monetary valuation of their business.

“Yada yada hi dharmasya…” goes a passage in the Bhagvada Gita. “When the world is troubled, I will come.” When they are troubled, societies discover who are the real business leaders that societies can trust to care for societies’ causes. 

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About the author

Arun Maira
Arun Maira

Former Chairman, BCG India & Member, Planning Commission

Former Member, Planning Commission of India
Former Chairman, Boston Consulting Group, India
Chairman, HelpAge International

Any discussion on policy and the future of India is enriched with Arun Maira’s views, and not just because he was a member of the Planning Commission of India for five years till June 2014. Arun is one of those rare people who have held leadership positions in both, the private as well as the public sector, bringing a unique perspective on how the two can work together to foster growth for India. He has led three rounds of participative and comprehensive scenario building for the future of India: in 1999 (with the Confederation of Indian Industry), 2005 (with the World Economic Forum), and 2011 (with the Planning Commission).

In his career spanning five decades, Arun has led several organisations, including the Boston Consulting Group in India. In the early part of his career, he spent 25 years in the Tata group at various important positions. He was also a member of the Board of Tata Motors (then called TELCO). After leaving the Tatas, Arun joined Arthur D Little Inc (ADL), the international management consultancy, in the US, where he advised companies across sectors and geographies on their growth strategies and handling transformational change.

Another decade later, Arun was back in India, this time as the Chairman of the Boston Consulting Group, a position he held for eight years till 2008. The other leadership positions he has held include being the chairman of Axis Bank Foundation and Save the Children, India. He was also board member of the India Brand Equity Foundation, the Indian Institute of Corporate Affairs, and the UN Global Compact, and WWF India.

Recognising his astute understanding of both macro as well as micro policy issues, Arun has been involved in several government committees and organisations, including the National Innovation Council. He has been on the board of several companies as well as educational institutions and has chaired several national committees of the Confederation of Indian Industries.

In 2009, Arun was appointed as a member of the Planning Commission, which is led by the Prime Minister of India. At this minister-level position, he led the development of strategies for the country on issues relating to industrialisation and urbanisation, and drove the formulation of policies and programmes in these areas. He also advised the Commission on its future role.

With his vast experience and expertise, Arun is indeed a thought leader. He is invited to speak at various forums and has written several books that capture his insights.

His recent books include An Upstart in Government: Journeys of Change and Learning; Redesigning the Aeroplane While Flying: Reforming Institutions (published in May 2014); Remaking India: One Country, One DestinyTransforming Capitalism: Improving the World for Everyone; and Shaping the Future: Aspirational Leadership in India and Beyond.

His book, An Upstart in Government: Journeys of Change and Learning (Rupa), was published in August 2016. The theme of the book is: the progress of nations and organizations has to be a cooperative endeavour. A good society is one that enables each individual to realize his or her aspirations. Everyone must cooperate to create such a society. The book should be of great interest to leaders in government, in the private sector, and in civil society organizations also. For they must all create better cooperation systems within their enterprises and with each other too.

Listening for Well-Being: Conversations with People Not Like Us, was published in 2017. The book is an incisive analysis of the causes for the increasing divisiveness in societies, aggravated by the shallowness of public discourse, and the break-down of communications between people with different beliefs and histories. He suggests ways to reverse these dangerous tendencies and make the world better for everyone.

His latest book is titled Transforming Systems: Why the World Needs a New Ethical Toolkit. In the book, he says, while economies have been growing, systemic problems of social inequality and environmental unsustainability are becoming intolerable. This realisation led to the Sustainable Development Goals, which all countries signed up to achieve. A new toolkit is required to attain these goals that go beyond the precepts of good business management and prevalent best practices in government as well as civil society organisations. This toolkit has to be founded on disciplines of systems thinking, ethical reasoning and deep listening.

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