The emerging future role of boards

Directors on boards have two distinct roles: A “map” role and a “compass” role. The former is the traditional role. It is about overseeing the short-term goals, with a horizon of a few years. The latter is about the long term, securing the future over decades. The overseeing role is most often written about. There is a shift in focus from the short term to the long term.

This article is about the long term. Management needs new ways of thinking to make companies survive and grow for the long term, and to be sustainable companies in every sense of the word. Sustainability is about conducting business in a manner that the business can flourish for many decades by being of, by and for the communities around the business.

For 53 years, I have been associated as an employee with and director of two large corporations. I may be pardoned for being admiring of them both, because indeed both are admirable. Hindustan Unilever, India’s most multinational-local company and Tata group, India’s most local-multinational group. I know every sinew and vein in these two corporations. For many decades, both have had a huge philosophy and heritage of sustainability. Both Unilever and Tata are more than a century old; even now, both are youthful and vibrant, in my view because of their sustainability philosophies, which manifest through various terminologies — corporate social responsibility, environment impact and community development.

When we raise our children, we undertake the travails of their infancy and childhood, concurrently imparting the foundations of human values for their adult years because the short and long term are intuitively woven together. We don’t think, “Let us deal with the child’s character building later.” In a similar manner, sustainability should also be built into a company right from infancy.

Nature instructs us that a species is in harmony with its ecosystem when it gives back about as much as it takes — like the Australian possum and the eucalyptus tree. Team sports teach us that a winning team consists of collectively collaborative players, who are individually competitive.

In the 1890s when Tata founder Jamsetji Tata planned to set up an Indian steel factory, he instructed his son about the upcoming steel city, “Be sure to lay wide streets planted with shady trees, every other of a quick-growing variety…..Reserve large areas for football, hockey and parks….”. That is how the model city of Jamshedpur came up. It was quite similar when William Hesketh Lever set up at Merseyside the colony township of what is now called Port Sunlight, near Chester in England. On the centenary year of Lord Leverhulme, it was said of him, “the ruling passion of his life was not money or even power, but the desire to increase human wellbeing by substituting the profitable for the valueless.”

Two lessons: First, that sustainability is not an incidental “nice-to-do” byproduct of business and second, that entrepreneurs think about it early in the development of the venture. The lessons of sustainability are like yoga and ikigai. Yoga teaches that scientific breathing is not a “nice-to-do” exercise, it is the essence of good living. Japanese ikigai teaches that hara hachi bu (eat only up to three quarters of stomach capacity) is key to a long life.

Nowadays I serve as chairman of Castrol India, a fine and long-living company, which places sustainability at the core of business. Sustainability is not the exclusive preserve of century-old companies. I am an independent director of Hemas Sri Lanka plc, a family-owned, though professionally-run, company. By Sri Lankan standards, it is large, though small by international standards. This young, publicly-listed company operates a programme branded as Abhimana (means pride) “to promote sustainability as a lifestyle across the company”, as their board and management practices demonstrate.

The boards of such companies agree time-bound sustainability goals with the management and then leave the management to execute, with accountability directly to the board of directors. It is essential, indeed satisfying, for directors to discuss diverse subjects like community skill enhancement, health and education promotion, carbon footprint and water balance on a pre-planned basis at board meetings.

In closing the pandemic-racked 2020, it is instructive to recall the words of a long-serving chairman of Tata Sons, JRD Tata, “ ….Corporate enterprises must be managed not merely in the interests of their owners, but equally in those of their employees, of the consumers of their products, of the local community, and finally of the country as a whole.” 

rgopal@themindworks.me

The writer is an author and corporate advisor. He is distinguished professor of IIT Kharagpur. He was director of Tata Sons and vice chairman of Hindustan Unilever