Corporations are also to be blamed for poor compliance and regulatory frameworks. Large family-owned companies in India struggle to trust professionalism and organizational procedures. Their companies had probably expanded in a very different era—one fraught with crony capitalism and often driven by the fathers of the current owners. The nature and pace of growth of these businesses at that time were, therefore, often different from what was expected of them now.
To stay in step with changing times, Indian family-owned companies have, over the past few decades, made the switch to hiring CEOs with professional credentials. However, in many of these cases, the relationship between the company owner and the CEO has not been easy. Usually, the management styles of the owner and CEO differ depending on the pace of organizational growth they desire. Often, the employees of the ‘old establishment’ are also difficult to bring on board to a more professional working environment. These employees then become troublemakers, obstructing the transition to ethical, transparent, systems-based corporate practices. Any bad business deal, poor performance in profits, or undesired change in working style is blamed on the ‘new way of doing things’, which is quick to be deemed a failure by its opponents in the company. Either the owner or the CEO is unable to endure these pressures of changing work culture, and caves in.
For example, India’s largest business conglomerate by revenue, the Tata Group, surprised everyone when, on 24 October 2016, the Tata Sons board approved a resolution to remove Cyrus Mistry as chairman of Tata Sons, only four years after he was brought in to replace Ratan Tata. Mistry, educated at Imperial College and London Business School, was the sixth chairman of the group, and only the second to not bear the family surname. The Tatas said that Mistry was ousted because the board lost confidence in him, while Mistry has maintained that the Tatas were afraid of his clean-up drive, which resulted in his dismissal. Mistry has also raised various corporate governance issues in the Tata Group since his expulsion.37 Immediately, Ratan Tata, of the founding Tata family, resumed chairmanship of the company for the subsequent four months.
On the one hand, India offers one of the most tiresome conditions in the world for business—if done ethically. On the other, the loose set of ever-changing rules and massive market opportunities make it easy to exploit the loopholes and make a profit. This is the brittle structure many Indian corporates are built on today. They have looked for loopholes in the law, at times taken advantage of the weak regulatory oversight, and capitalized on the enormous Indian demographic dividend. It is a risky game, but the rules are so weak that the game becomes easy. However, in a crisis, the lack of organizational coherence, both internally and in the external regulatory environment, leads to institutional accidents. As a result, there is a heightened risk of the collapse of the parts holding the corporation together.
By no means am I maligning corporations, or saying that being astute in making profits is a bad thing. Instead, my point is that for profits to be conducive for economic development, the manner in which they are earned and distributed needs to be fair.
Fair distribution of profits can only happen when economic development is not driven by the whims of individuals, and is combined with institutional checks and balances. Why? If the appropriate checks and balances are not in place, three things will happen. First, the gains will be concentrated among a few while the losses will be diffused among many. As a result, the number of people getting poorer will only increase. Second, the nouveaux riches who are often imperfectly adjusted to the existing order will keep wanting more power and social status commensurate with their new economic position, which will then widen the socio-economic gap between rich and poor. Third, eventually, increased literacy, education and exposure to mass media will allow people to recognize the widening wealth gap, causing frustration and hopelessness amongst the have-nots.
At the crux of it, just like democracy is as ineffective as a dictatorship if it does not represent consensus, legitimacy and justice, private enterprise is a disastrous form of crony capitalism if the people implementing checks and balances—in the corporations and the government—are not ethical and mindful. Indeed, in corporations, as in politics, it is not just the form but also the degree of governance that is important.
Ultimately, governments and corporations are made up of people who can neglect or pay lip service to ethics, compliances and regulations mechanically without applying their minds. The dwindling capacity of each of us to think, evaluate and choose affects our values, ethics, emotions and volition. If our education—at home, at school and in society—forbids us to think for ourselves, then we end up being replicas of one another, trying to mimic others but failing, because it is impossible to be entirely like another person. So we become second-handers, allowing ourselves to be run by the others, in our eternal quest to be like the other. But we will constantly be told that we are still not good enough, making us work harder to resemble the prototype. This is the dysfunctional utopia that corporations thrive on.
By the time we join an organization as executives, our faculty of reasoning is so rusted that we cannot assess how we truly feel about what we do. That which was supposed to be a rather basic activity of earning a currency, to barter for the goods we ourselves cannot ourselves produce, now governs our life. We ferociously chase career choices that the majority around us desires, each person
