Corporate governance: Lessons for the future

A friend of mine, once a brilliant organisation theorist, told me three things threaten ethics in India. “First”, he said, “is the word sustainability.” He cynically claimed it is the last refuge of scoundrels, as nationalism was once. The word “sustainability” is seen so superficially, merely as an engineering exercise that the links to waste, consumption, the aspirations of the middle class are things which are wished away as an engineering problem. Technology becomes a substitute for ethics. 

The second threat, my friend cited, is corporate social responsibility. CSR is read for charity but charity is not social responsibility. The firms act as if they are doing a favour, bestowing gifts on society. The method and the mentality is that of the aid model. Today, one needs an evaluation, a philosophical assessment of CSR, in terms of ecology and ethics not just in terms of money spent. An accounting is not a social audit. 

My friend added that the third word is even more problematic. He said it operated under the label governance. Governance is a pompous way of referring to administrative or managerial issues. It is a World Bank term that Narendra Modi and N. Chandrababu Naidu exploited to create claim to a different style. The sad thing is that all three words have such power and yet they have been emptied out of their real meaning.

I was thinking of these observations given the recent stories in the press. The recent struggle in the Tatas where the chairman was overthrown had shades of a Byzantine battle. References were always made to Cyrus Mistry’s style or to Ratan Tata’s addiction to power, yet there were no clear or objective analysts. The media is too reverential to cast any doubts. Yet if one looks at it objectively it is time one reassesses the Tatas reputation from their innovations in social audit, to their style of institution building. Labels like the presence of a sustainability officer are there, but it does not tell us what substantial changes are being made. Tata remains a corporate legend that needs to be demystified. One is not making a request for an RTI but for a greater initiative in social scrutinies of such major firms. The Tata controversy is an absolute failure of storytelling, of a power battle reported as if it is an absurd game of musical chairs. Ethical reporting instead of embalming reputations must keep firms under critical scrutiny. It will help us break stereotypes in what is a changing corporate environment. 

This problem becomes even more acute when a citizen confronts the recent controversies around Infosys. Infosys is another legendary firm, yet in ordinary folklore, if both Tatas and Infosys are having what is now being dubbed governance problems, something is wrong in the corporate world. The scandal, if one can call it, that is not of corruption though the severance pay given to ex-CFO Rajiv Bansal seems like a Christmas present, an inducement to good behaviour or even discreet silence. Rs 17 crores as severance pay does smell of tacit extortion. 

I am sure as the current chairman R. Seshasayee says the decision was a bona fide one. He claimed that firms should not be distracted by what he terms noise but Mr Seshasayee as an information expert should remember that noise is unwelcome music. It is a sound that is destroying or disturbing the Infosys symphony. The problem in both the Tata story and the Infosys case is not the question of controversy. Controversies are bound to happen specially in moments of transition, as legendary founders give way (reluctantly) to the next generation. Both Sikka at Infosys and Mistry at Tatas had to shoulder the burden of the glorious past. The issue is, and it is a problem in governance — how does one frame such problems, what degree of openness and transparency marks them? There is a second set of issues. Firms which talk of corporate social responsibility, which claim the high ground of ethics, have to communicate in a different way to society. These are exemplary, even paradigmatic organisations. They form part of the legacy of modern India, exemplify the possibilities and challenges of institution-building.

Yet the presentation of information in public life is disappointing. One expects more from a N.R. Narayana Murthy, a Mohandas Pai or a R. Seshasayee. They have been critics of politics but as one confronts their own demand for standards, candidness, honesty and integrity, they seem to fall disappointingly short of their own pretensions and claims. 

There is, however, a broader issue that I want to emphasise. Civil society of late has been quiet about corporate governance. At one level one almost senses that CSR was invented to mute NGO voluntarism. But given this, one must now confront in a new conversation where the three key words one began with — sustainability, CSR and governance — have to be reworked into the warp of the democratic imagination. The two controversies — Tata and Infosys — have to be seen as fables, lessons for the future. Such an approach is important because in debating with the best of corporate governance, one confronts new possibilities and the limits of the idea. On civil society’s side one must ask how does one make these new words, these new glossaries of competence and concern work for the democratic imagination in new ways. 

The new forms of audit, accountability and responsibility being developed by movements like the MKSS have to be applied to issues of corporate governance. One would suggest that the medium of panchayat hearings — the Jan Sunwai be extended to corporate meetings creating a new form of hybrid accountability to stakeholder and shareholder. The stakeholder in the wider ecological, economic and democratic sense does not figure in the corporate imagination. 

Secondly, there should be an audit of innovations in an ethical, ecological sense. All these firms talk of innovation. One has to ask what are the shadow effects of innovation, in terms of deskilling, unemployment and obsolescence. Democracy needs both sides of the picture.

I admit I am not merely reading the text of the recent Infosys imbroglio. There is context and even a pretext for new social and institutional innovations. The Infosys and Tata controversies or even the now distant debates on biotechnology are consumed passively, even indifferently ignoring the possibilities for creating social innovation. Words like CSR, governance and sustainability have to link to new worlds and help create a more inventive democracy.