The Hindu Business Line : Redefining corporate responsibility

WE are confronting an extraordinary situation in the 21st century. Never before in the history of the world was the safety of so many in so much jeopardy as now. Never before have so many people acquired so much material wealth, even as an ever larger number lives "below the poverty line". Never before have so many had such absorbing and fulfilling work, while so many others are engaged in much drudgery and dissatisfying work, or worse, no work at all.

This unique and unparalleled situation has been brought about by various reasons, but, ironically, the most significant contributors are business houses. Corporations are the basic cells of modern economic life. Their phenomenal success in converting the earth's resources into economic wealth has transformed beyond recognition the life and landscape in the social and physical world.

The advent of the multinational enterprise, and the internationalisation of financial markets have together formulated the direction and dimension of the modern corporation to its acme and zenith, where it can pose and present a formidable challenge to the power and influence of even a nation state.

Global corporations function across political frontiers, and quite often they eschew and escape surveillance by individual sovereign states. The annual turnover of the larger corporations often exceeds the gross national income of small countries, which factor has given them unprecedented economic power and political clout.

Almost everything we use in the modern world is a product of the business enterprise — from the foods/beverages we consume, the clothes we wear, to the phones and PCs in our homes/offices. Alvin Toffler, in his book Future Shock, said that it is in the last less than 100 years that 90 per cent of the products (including the computer) which we use today have been invented by man. Incidentally, he rates computer as the third most important invention by man, after fire, and wheel.

We cannot do without business corporations. What is imperative, however, is that we exercise adequate and collective control over the way business corporations conduct their affairs so that they support, and not sabotage, the ecological environment and the balance of nature. When corporations realise that they are instruments of social purpose, that they are established within society in order to accomplish some useful and social objectives, then they have a moral and ethical right for a continual existence, a licence to use natural resources, and the concomitant responsibility to produce socially beneficial products and services.

Whereas if they debase human life, and act with contempt towards the community of which they are a part, if they plunder and pollute this planet, and produce "bads" as well as "goods", then they forfeit their right to operate. The sole and solitary pursuit of the paisa will hardly justify their existence.

We are all captives of a culture of capitalism which over 200 years has worked with a single-point agenda: To produce enormous wealth and provide a higher standard of living for millions of people. But the wisdom and cost of continuing indefinitely on this path has, now, come under the microscope. In the words of Tim Flannery, mammologist and palaeontologist, we have become "future eaters". If we want to transform our economy and make it more enduring and ennobling we must add some pepper and salt into its operation.

The crucial issue that needs to be addressed in this context is the modus operandi of changing the current model of the corporation, in order to ensure the continuous well-being of this planet. As corporations have been the major cause and culprit of the problem, therefore, they must be part of the answer as well.

It is an accepted tenet of the present-day life that change is the only unchanging constant. Managing change has been acknowledged as one of the most important and challenging tasks faced by the corporation today. Initiating and directing a change process, where there are no existing models or benchmarking is like building a bridge as one walks on it.

New circumstances need new responses. The crises faced by humanity can be resolved only by the application of concerted corporate action. For those who are able and willing to perform the task of revamping the organisational world with a sense of purpose and direction — the hour has arrived — because this is, perhaps, the most momentous time in human history, when the destiny of the world can and must be determined.

There has been a long-standing debate over how the corporate responsibility can be redefined — which includes its legal constitution, its social obligations, its role in environmental protection, and the constituency to which it is accountable. The sum and substance of this debate is whether the role of the corporation is merely to create financial wealth for its owners, or is it more holistic such as to include the well being of a wider range of stakeholders — that is, the community, the environment and the posterity.

The school of liberal economics contends that the role of the business corporation is confined to maximising short-term returns to its shareholders. Whereas the school of stakeholder capitalism demands that the corporation must also cater to the welfare and interests of other stakeholders such as employees, suppliers, customers, the local community, the government, and the environment.

Most corporations have inherited commercially-oriented and profit-centred culture and values, that they tend to display a lackadaisical disposition and disregard to the social and environmental fallout from their business activities. Ecological and community issues often take a backseat in the discourse of their business management theory.

Whereas these issues are vital and pivotal for the survival of life in this planet, it is also crucial and central in terms of social justice. We need a new business economics, which redefines corporate responsibility to include natural resources as well as human resources — both inside and outside the organisation — within its ambit of accountability.

Building sustainable organisations requires a radical change of mindset from the mainstream business thought and practice. Large-scale shift in strategy necessarily involves treading on the toes of the organisational culture. The culture of a company is usually described as "the way we do business around here". It comprises the values, norms, symbols, myths, behaviour, and conduct which obtain in an organisation — the collective genius and consensus of the population at work. Much of it may be unarticulated and unreflective, often more visible to visitors.

Culture cannot be created by fiat: rather it must grow organically from the fellowship and experience of working together in teams and task forces. Critical to achieving success in this process is the proactive leadership, consciously developed and applied at all levels of management. Leaders play a significant part because they can personify and embody a new cultural profile by their thought, word, and deed. Leaders represent role models to other employees. A leader will be a catalyst and prime mover for a cultural change.

The surge of human energy consequent to this metamorphosis is the matrix from which a new culture will arise like the phoenix; and then, it will get further rejuvenated and invigorated to become per se a powerful change agent. It is this persistent and consistent process of transformation, which will support and renew the community, the economy, and the planet. It is a process which will impart a holistic purpose and mission to a business enterprise; and not make it a mere tool and technique for accumulation of material wealth and mundane prosperity.

(The author is a Chennai-based freelance writer.)

More Stories on : Corporate | Corporate Governance

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Power of populism

Redefining corporate responsibility

Fighting the battle against poverty

Sustainable development — Role in enhancing economic growth

Impact of rupee appreciation — I-T sops for exporters unwarranted

New look Lok Sabha

CAS: Switched off, what next?

Indexing the corporate sustainability

Environmental compliance

Rectification required