With my limited ability to both comprehend and articulate in English and Hindi, I can safely say that I am no expert at writing my ideas to capture anyone's imagination. However it is easier to state your confusion about the world in a confusing manner. Content and approach justly reinforcing, not positively though.
Recently read two opinions by eminent thought leaders on markets / globalization & authority of corporation, however what makes me write this piece is a conversation with Jeff, who is leading UN Global Compact’s Learning Agenda. UN’s Global Compact focuses on including the corporate in development of communities by seeking their commitment to adhere to 10 Principles.
In my view, Corporate Responsibility agenda is working as ‘window dressing’, ‘sales to bottom of the pyramid’ or by the opinion that a company will continue to grow in the future of it invests today in its marketplace / community: no rocket science. It is not driven in most places by a ‘moral responsibility’ & definitely is not counted as a pervasive means to operate ‘core business’.
Some observations:
1. The academic knowledge and focus on Corporate Responsibility in United States is much higher than any other place in the world (same for most other disciplines of higher education and exploration).
2. The Companies in Europe though have an aware and educated ‘plan’ on engaging beyond shareholders to develop community / marketplace. Possibly the legal compliance & business climate creates the sensitivity and situation for it, compared to USA.
3. Most best case practices of Corporate Responsibility implementation are coming from corporations originating from ‘developing countries’: India & Brazil leading the pack. This is not because these countries need community development more than the North, but because the business culture and social norms are also significantly different, breeding its own understanding of the ‘modern corporate’.
4. The Corporate Responsibility aficionados argue that the liability of corporations lies much larger beyond its stated balance sheet & the social, environmental risks are often not reported risking not only the society but also the shareholders. Our ‘measurement’ system of double entry book keeping and economic indicators are definitely not equipped to count it all. However progress is being made by Auditing firms like PwC & Institutions like World Bank & global Compact in the same.
5. The role of government in determining the compliance is critical in country markets, however in all emerging & ‘waiting to emerge’ economies the need of FDI (foreign Direct investment), WTO agreements, limited trade knowledge & experience, eagerness to reach positive trade balance, opportunity for corrupt politicians to gain benefits, slow legal-parliament systems etc. ensure that the compliance standards are ‘put on hold’
The situation does give a very uneven advantage to the ‘natural forces of the market’: the products of the corporate to fulfill the ‘need’ in the consumers. Advertising creating psychologically compelling mirage reasons to look better, drive better, eat better, communicate better etc. plays its own part in this ‘natural force of the market’.
I have come to learn, people will always choose from what you will offer them, tomorrow if there are no options of potable water and only bottled water is available, that is what people will buy, and the reason given to them will be a ‘natural shortage’ of water. The bible too has a mention of feeders and consumers and how it is depriving and dependent model of living.
Articles, one from John Kay & George Soros which I came across last week have been insightful and opinionated, but both converge at ‘role of the state / citizen’, Following are the excerpts :
George Soros on Globalization (Book-2002):
"It is dangerous, however, to place excessive reliance on the market mechanism. Markets are designed to facilitate the free exchange of goods and services among willing participants, but they are not capable, on their own, of taking care of collective needs such as law and order or the maintenance of Market Mechanism itself. Nor are they competent to ensure social justice. These 'public goods' can only be provided by political process. "
Political Processes generally speaking are less efficient than the market mechanism, but we cannot do without them. Markets are amoral: they allow people to act in accordance with their interests, and they impose some rules on how those interests are expressed, but they pass no moral judgment on the interests themselves. That is one of the reasons why they are so efficient. It is difficult to decide what is right and what is wrong; by leaving it out of account
John Kay: “Business Leaders have no natural authority”: FT April 4th 2005.
When people tell us what to do, we tend to ask: "what gives them the right to do that?" We ask it of political, spiritual and intellectual leaders; we ask it of traffic wardens and teachers. The legitimacy of authority is a fundamental social and political issue that defines the structures of modern democracy.
Companies are among the most powerful of modern institutions and business leaders are among the most powerful people in modern society. What is the source of their legitimacy? Marx believed that the difficulty of finding good answers to these questions would destroy capitalism itself. So far, he has been wrong. But the health of capitalism nevertheless demands an answer.
That is why the governance of large companies is a public as well as a private matter. When a company says: "we seek to create shareholder value", it is proper to ask: "what gives you the right to do that?" The case for capitalism is not a moral one derived from abstract notions of freedom of contract but a pragmatic argument rooted in the success of the system in promoting efficiency and innovation. Modern business and the people who lead it achieve authority through, and only through, their success. The legitimacy of their authority is achieved - literally - by delivering the goods
