|
| Pratip Kar: United hearts, united minds | | The Rig Veda, Sun Tzu, corporate governance codes, all argue that organisations work well only when there is a commonality of interests |
| Pratip Kar / New Delhi Nov 09, 2009, 00:08 IST |
|
I was recently acquainted with a very successful family-owned business in Kolkata. The enterprise began in a small way as a symbol of the nationalist spirit, about eight decades ago. Since then the business has grown from strength to strength through diversification into multiple product lines, modernisation and innovation. It is still growing. Though ownership and control still remain with the family and none of the businesses are listed on the stock exchanges, the family felt persons of great eminence had to be inducted into the Board so that they could give the best possible advice on the business. They also believed in the fidelity of financial numbers and felt that they needed to get their books audited by a reputed auditing firm. They believed that the growing complexities of business and international competitiveness demanded that the chairman and the CEO positions be better left to outside experts. They voluntarily accepted Clause 49 as the benchmark for corporate governance standards and incorporated systems and procedures which would ensure compliance, because these would be in the best interest of business. They even called outside experts from time to time to check if the company’s governance was on the right track. If one enters the company and talks to the C-suite, one can easily feel and see how shared practices and beliefs permeate across the organisation.
Till some time ago, I was associated with a group that began practising corporate governance and environmental and social governance from 1912. The Group began its journey in the Victorian period, inspired by the spirit of nationalism, to become an international business conglomerate with its footprints across continents. The companies in the group grew all along with a shared belief in a common value system and a common purpose of improving the quality of life of the community it catered to and returning wealth to the society it served.
A group in south India began in a small way as a moneylender in 1900 to become a $3-billion business by 2008. During this period, the group grew by managing generational transitions within the family smoothly, carrying out organisational and entrepreneurial changes through transparency and without operational disruption. The family-managed group successfully converted into a professionally-managed corporate house, engaging outside experts for restructuring and succession plans and even handing over reins of the chairman and CEO positions to experts outside the family. A common value system was shared by the family and, from the family there was osmosis into the business. Times changed but the values did not. A senior member of the family told me sometime ago, that for the family, business interest and the interest of those who manage the business were paramount and the family was secondary. They always wanted business to grow on the strengths of integrity and transparency. If they had brought outsiders into the Board, it was because they felt that complexity of business needed such people to steward the business.
These examples and several others across India — in small, medium and large enterprises — emphasise the importance of shared purpose and principles. These companies, whether listed on the stock exchanges or unlisted, are among the better-governed companies in the country. The actions of these companies and those of their controlling shareholders are predicated not in the interest of the controlling families or of any of the family members, but primarily in the interests of business growth. It is the strength of their belief in the value systems that has induced constructive, harmonious behaviour in the respective organisations.
Leadership is an integral part of human condition. It has been a part of our society since the time we were nomads and hunters. We needed someone to go out and hunt first and the rest would follow. Leadership is also integral to the growth of business. In companies, it is the Board which provides this leadership. The effectiveness of this leadership is tested by the extent to which shared values and common beliefs seep from the Board into the whole organisation, till the enterprise itself is soaked in it. Shared value systems and beliefs in them is a catechism these companies seem to practise. For them, it is the fountainhead from which corporate governance springs. In the West, the GE in the US and the GEC in the UK, which started near about the same time on the two sides of the Atlantic, are good examples which demonstrate the consequences of effective Board leadership and shared values and the absence of it.
It is possible to ascertain the extent to which this leadership role exists in a company. There must be some good board practices, effective controls, transparent disclosures, well-defined shareholder rights and board commitment. These can be structured into a simple check-list which will allow the Board to ascertain the extent to which they are successful in their leadership role and in diffusing a common value system across the organisation. When the Board is able to provide a strong leadership and aspirations, values and beliefs are shared by the organisation, compliance with governance codes become easy, and business grows on ethical conduct. Shareholders’ wealth increases.
Henry V in Shakespeare’s play by the same title, does not compel common behaviour in his army. Instead, he unites his hungry and exhausted army, ill with dysentery, into a common purpose in his famous St Crispin’s Day speech. “We few, we happy few, we band of brothers,” he exhorts. He even offers to release any soldier who does not want to participate in the battle of Agincourt. Henry recognises that fighting with fewer men who are united in purpose is better than fighting with more men who have no shared purpose. He says:
“We would not die in that man’s company/ That fears his fellowship to die with us.”
There are equally powerful examples of antithetical behaviour among business families and controlling shareholders. There is a characteristic absence of shared values. The consequences of such behaviour visit businesses, which are then compelled to perform under dissensions and discord. Businesses grow only apparently under these conditions. Such growth can hardly be sustained, unless the controlling shareholders become aware of the endgame and do a course correction. But this does not happen often and easily. We have seen how in the Mahabharata, the two branches of the same family fought over the ownership and control of a common asset — Hastinapur. Anger, envy and jealousy blinded them. It divided the wise men, family patriarchs, kings and generals. The belief in traditions and values was lost. Eventually, neither family could possess the crown and the once prosperous kingdom of Hastinapur was lost.
Rig Veda exhorts us to a Common Mantra, a common gathering to union, one common aspiration, united hearts, united minds joined together in one knowledge, when it says:
That is the importance of shared values, that is the essence of Board leadership, that is the fountainhead of corporate governance.
(The author is a former executive director of the Securities and Exchange Board of India and is currently associated with the IFC’s Global Corporate Governance Forum of the International Finance Corporation and the World Bank. These are his personal views. pratipkar21@gmail.com )
|
|
|
|
|
|
|
|
|
|
 Read Business news in |  |
|
|
|
|
|
|
Advertisements |
|
|
|
|
|
|
|
|
|
|
Content Guide
