Is the capitalistic model broken? India needs many more leaders like Tata

Amid the public outpouring of grief upon the passing of Ratan Tata, I became reflective. Could Russian economist Nikolai Kondratiev’s long-cycle theory be at work about enterprise management? Is it in decline? Should there be fresh thought and action? Can future business leaders be loved as much as they are respected?
 

Ratan was not the first group head to receive adulation. Archives show when Jamsetji died in 1904, the public was full of praise and love for him, as indeed happened when Dorabji Tata died in 1932, and yet again, when JRD Tata passed on in 1993. How many enterprises have earned the public’s respect and love over a century and more?
 

A crucially important attribute of these leaders was their ability to lead leaders. Jamsetji relied upon Bezonji Mehta and Burjorji Padshah. JRD honoured leaders who, in his own opinion, were “better than him” — for example, Sumant Moolgaokar, Nani Palkhivala, and Darbari Seth. Ratan’s success was enhanced by leaders like Faqir Chand Kohli, Noshir Soonawala, and Jamshed Irani. As JRD would say, Tata leaders had to be “affectionate”.
 

In 1910, a student of Lucknow University, B Mukherjee, asked noted economist Alfred Marshall about how India could grow faster. Recall that 1910 was the peak of the Raj and the Georgian British Empire, with the imperious Lord Curzon having left as viceroy just five years earlier. Exactly 114 years later, I quote Marshall’s reply: “If India had a score or two men like Mr Tata (Jamsetji), and thousands of men with Japanese interest in realities, with virile contempt of speech-making in politics and law courts … India would soon be a great nation” (italics mine).
 

My reflections took me into multiple avenues. Has India produced “a score or two men” like Jamsetji? In Japan, for example, Shibusawa Eiichi (1840-1931) inspired giant leaders like Konosuke Matsushita, Soichiro Honda, Akio Morita, and so on. The American capitalist model has provided much of modern management pedagogy and training. The Chicago school of free enterprise about the role of a corporation being to maximise shareholders’ returns has been dominant. The Dodge versus Ford Motor Company judgment by the Michigan Supreme Court in 1919 reaffirmed the shareholder primacy principle. Yet, I had spent my whole career — 31 years in Hindustan Lever and 18 years in Tata — working for companies that did not practise shareholder primacy. And both have been long-living, admired, and respected, each in its own way.
 

Perhaps the prevalent system of shareholder primacy  —  “winner takes all” and “high market capitalisation fastest”  —  is already broken or rapidly approaching that status. I came across what is described as “pioneering research” done by Living Machine Institute (LMI), Austria (www.livingmachine.org).
 

The LMI and the Global Peter Drucker Forum will host an event in Vienna in mid-November. The LMI’s research into India’s 100 value creators over a long period of time shows that (i) there is a relationship between “living elements” and “perpetuity value” in an institution; (ii) perpetuity value is not a passive benefit, it is earned by an organisation through the vitality of living elements; (iii) a healthy company derives 70 per cent or more of its derived enterprise value through perpetuity value; (iv) creating perpetuity valuation is not about corporate social responsibility but a practical pathway to creating superior compounding returns through living elements. Is it likely that many of India’s top companies may have a modest perpetuity valuation? There must be merit in the findings of the LMI.
 

Governance is part of Indian itihasa. When Bhishma lay on the bed of arrows during the Kurukshetra war, his advice to Yudhishtira on good governance was sarva sama hitam (goodness for all), which Gandhiji adopted as sarvodaya. Janaka worked for the uplift of the people of Mithila. Our traditional scriptures emphasise lokah samastah sukhino bhavantu (may all people be prosperous). Chanakya emphasised yogakshema (individual and collective good). Raja Raja Chola and Mahendra Varma Pallava were renowned for philanthropy and fostering religious tolerance. When Swami Vivekananda visited America in 1893, he suggested a Vedantic four-point plan to American businessmen: Be self-aware, protect your resources, serve others before self, and act with compassion. Recall contemporary publications such as Conscious Capitalism, Enlightened Capitalism, What Went Wrong with Capitalism, and many others.
 

Questions abound. Can India advance compassionate capitalism? Can India have more enterprises that have a compulsive purpose, deeply embedded in an organisational culture? How can India create sustainable, humane, and enlightened enterprises? How can many more of our companies be respected and loved?
 

India should host an international conference on “Wise and Compassionate Leadership”, involving leading practitioners, thinkers and academics. Perhaps the Confederation of Indian Industry, of which the Bajajs, Tatas, and Godrejs were all active leaders, can collaborate with the LMI, IIT Kharagpur’s Partha Ghosh Academy of Leadership, Bhavan’s SPJIMR and enterprise leaders to consider how the Indian policy framework can be adapted to include both compassionate leadership and sound business purpose.
 

That would be a tribute to Ratan Tata. More importantly, India must, and can, have many more than “a score or two like Mr Tata” so that Viksit Bharat becomes a reality.

 

The writer’s latest book is JAMSETJI TATA: Powerful Learnings for Corporate Success, coauthored with Harish Bhat. rgopal@themindworks.me