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The Good Company

The time has come for firms to take a more responsible role in society

Published: May 12, 2012 06:05:44 AM IST
Updated: May 11, 2012 04:35:40 PM IST
The Good Company

Merchants, financiers and businessmen must feel an unloved lot. In spite of large global companies—Shell, Sinopec, Walmart, Nike, Apple, Microsoft, GE, BHP Billiton and such—creating almost half of the world’s $65-trillion economic output, people rarely see them as entities working to increase choice, provide livelihood and improve quality of life. From bribery, ravaging the environment, use of sweatshops to anti-consumer behaviour, many corporations are accused of one or all of these serious misdemeanours. The Edelman Trust Survey for 2012 shows less trust in business and CEOs than the last two years and is lower than what it was just after the financial crisis of 2008.

To some, this is a modern phenomenon. Most of the global multinationals, who now roam the world the way the T Rex once did, have come up in the last 100 years. However, a look at history will show that the grudge already existed. JRR Tolkien’s Lord of the Rings talks about the destruction the Shire and its beautiful forests. Though Tolkien was born well after the Industrial Revolution he had seen the way it had transformed the famed English countryside. He had seen smokestack chimneys belch black smoke across the once clear skies. His description of Mordor, the evil wizard Sauron’s lair, bears a lot of resemblance to the post industrial revolution landscape.

Lord of the Rings is not a historical text. But look at it as a work of literature that has influenced countless people about an event—the Industrial Revolution—which created the world of today. It drastically increased productivity and made the human kind better off. Why would an event that so changed humanity—on the scale of the Enlightenment, something that rid the world of its hand-to-mouth existence—be viewed as something undesirable?

This story has repeated itself in multiple variations across time and regions. Consider the case of India. In little less than 10 years, mobile telephony democratised communication. Leading companies in this area such as Bharti created an innovation—the minutes factory—that was ready to be exported across the world. Almost everyone agreed that a tough business environment had created world beating companies.

And now, all that pales before the muck of corruption that has tainted most of the companies that offer these services. The mineral-rich tribal areas in Orissa that could have done wonders for India’s economy lie in a state of siege. Why? Some companies that ought to have had a little more patience and empathy did not. The result is that business groups that once seemed to have the keys to the future sit handcuffed to lost opportunities.

Perhaps the time has come for a business to sign a new deal with a wider community within which it operates. Businesses need to be profitable, but they also need to consider how they engage with the community within which they operate.

Many years ago, the chief financial officer of a telecom-to-television conglomerate, who was also known for his matchless understanding of the Bhagvad Gita, said: “Don’t talk to me about ethics. Just make laws about what you don’t want my company to do.” This view has to be given up. The post-financial crisis world shows how businesses need society. Each time governments keep interest rates artificially low, they hurt thousands of diligent savers so that entrepreneurs and businessmen can borrow cheaply and get their businesses back on track. When companies in India ask the government to bail them out or ask banks to relax debt norms they are asking the society (tax payers) to take a haircut so that they can recover.

As the people around the world connect much more ubiquitously through social media and cheap mobile communication it is quite clear that, unlike in the past, tales of corporate misbehaviour will spread faster. It will also stay fresh in the digital memory of the society forever. So the new corporation, the corporation for the next century if you will, has to ask itself: This is good for me, but does it short-change the community or the planet? A corporation that proceeds only when it gets a “yes” to this question is not only doing the right thing, it is also taking a longer-term view.

Unilever’s CEO Paul Polman—one of our star contributors in this issue—understands this. He is making Unilever a much more sustainable company.

He also knows that just making Unilever sustainable isn’t going to be enough. He is ensuring that even his supplier ecosystem emulates Unilever. Now that’s taking a real long-term view.

Arie De Geus wrote a very influential book, The Living Company. It said that while human beings could live easily up to 75 years, most corporations do not survive beyond 45 years. His key message was that one of the factors that made corporations last was their ability to adapt to the environment.

And successful companies would do well to realise the shift in global sentiment here. They would do well to recognise that no one wants buccaneers in their backyard and if companies cannot be seen as a force for good, they will be thwarted. It doesn’t mean that they should throw money trying to hold fun fairs, or give their employees a fat raise or not close down businesses that are not performing. It just means that they need to have more empathy and they need to have a larger sense of purpose and justice when they deal with society, customers and their employees.
 

(This story appears in the 25 May, 2012 issue of Forbes India. To visit our Archives, click here.)

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  • Karvy

    A good company is determined by how well they understand the employee sentiments. I think online tools like www.barebars.com nd other stuff help in achieving a company understand its performance and whether its providing great job satisfaction.

    on May 18, 2012
  • Dips Sherman

    \'Business of making money\' in rent seeking industries has inherent contradictions. These could be well managed - so long as class systems and bureaucracies were accepted part of the eco-systems. As we go deeper into a democratic - information age, every penny earned here will be contested. So, if you are looking for a Good-Company, look for core Tech or Innovation based companies...

    on May 14, 2012
  • Hobbitmoviecouk

    Indeed - it\'s suspected that many of the landmarks in Tolkien\'s books are based on the area where he was brought up, near Moseley in Birmingham. In his childhood, many parts of this area were transformed from countryside to an industrial landscape. Indeed - the Mill in The Shire is based on one such place - Sarehole Mill. http://www.thehobbitmovie.co.uk/the-hobbit-movie-news-hungry-hobbit-20111121.html

    on May 13, 2012