Gandhiji's advice to young managers and old policy-makers

TRANSFORMING CAPITALISM: IMPROVING THE WORLD FOR EVERYONE

Lessons from Mahatma Gandhi

(Inaugural Address at Delphique 2023, at Management Development Institute, Gurgaon, 16 December 2023)

As I was preparing for this lecture, I recalled the headline on the front page of the Times of India on November 8, 2023. It said: “Allahabad University students to learn management mantras of Lord Krishna, and top biz honchos.” Below the headline were two pictures. One of Dhirubhai Ambani, the other of J.R.D. Tata. This gave me a good way to frame my lecture.

Seven questions:

1. How many of you know who JRD Tata was? 

2. How many have read the story of the Tata Group, or the biography of JRD Tata?

3. How many of you know who Dhirubhai Ambani was?

4. How many have seen the film, Guru, starring Abhishek Bachan and Aishwarya Rai?

5. How many of you know Mahatma Gandhi?

6. How many of you have read Gandhiji’s auto-biography, My Experiments with Truth?

7. How many of you have read the Bhagvada Gita?

Three lessons from Gandhiji for business leaders and public policy leaders

1. What Lord Krishna said to Arjun, Bhagavada Gita, Chapter 3: “You only have a right to the work, not the fruits thereof”

2. The principle of “Antodaya”

3. “Be the Change you want to see in the World”

Let me begin with my own story.

When I finished my college education in 1964, with a Master’s degree in physics, there were no management schools in India yet (other than XLRI in Jamshedpur—a school focused on labour relations). I joined the TAS. Whatever management I learned was from working with Tata’s leaders and from discussions with them at the Tata Management Training Center opened in Poona in 1965, the year I joined.

There I heard J.R.D. Tata explain the criteria he used to resolve leadership dilemmas at his level. He said that whenever he had to take a tough decision, he always asked himself, what will be good for Tatas? And what will be good for India? And, if there was a conflict in the two, he would take the decision that was good for India. He said that those decisions somehow always turned out good for Tatas in the long run. This leadership dictum of J.R.D is well known. 

When I heard him say it to us the first time, I heard him quietly say something at the end too. What he said was: I take the decision that is good for India, it somehow always turns out good for Tatas. But I also heard him quietly end with: “And if it does not turn out good for Tatas, does it really matter”. What he was saying, I thought, was what good would it do if Tata’s made profits and the poor people of India were not better off. 

The film “Guru” starring Abhishek Bachchan and Aishwarya Rai, produced by Mani Ratnam in 2007, was a block buster celebrating the management philosophy of Dhirubhai Ambani. Abhishek, representing Ambani, is accused of sharp management practices to finish off his competition. In a famous scene, he speaks to thousands of Reliance’s shareholders in a stadium and asks them if their lives have benefitted by his management of Reliance. They applaud him thunderously. Reliance proved to be a guru of management practices to produce returns for shareholders. However, though Reliance has masses of shareholders, less than 5% of Indian citizens have any investments in stock markets even through mutual funds. What about improvement in the lives of the 95% outside the stock market, one should ask? 

Contrast this with J.R.D. Tata’s philosophy. If he had a dilemma, he would choose what is good for the whole of India, not just for the shareholders of Tatas. 

Which is the more ethical philosophy of management? Shareholder capitalism, or trusteeship for society? 

Krishna gave Arjuna the answer in Chapter 3 of the Gita. He said: “You only have the rights to the work, not the fruits thereof”. In other words, you must do your work to the best of your ability, but the fruits of your success must not be yours alone to enjoy. They belong to everyone in the world that has created you. 

Let’s understand modern capitalism. The engines of growth in a capitalist economy are business corporations. The modern business corporation is an artificial citizen of society created by law. The template for a limited liability company by law was the East India Company.

The East India Company was an English joint stock company founded in 1600. At its peak, the company was the largest corporation in the world by various measures. The East India Company had its own armed forces in the form of the company's three presidency armies totalling about 260,000 soldiers, twice the size of the British army at the time. The operations of the company had a profound effect on the global balance of trade, almost single-handedly reversing the eastward drain of Western bullion, in effect since Roman times. The governors of the Company met in London. Their only responsibility was to ensure that accounts of the profits generated were accurate and that the profits were equitably shared amongst its investors. They were not responsible for, and hardly aware of, the marauding of the company’s officers and armies in India, China, and other Asian countries. 

The East India Company was nationalised by the British Crown, but its template has persisted in the designs of 21st century capitalist corporations. Corporate law enables capitalist business corporations to be selfish citizens of society. Corporations are given all the legal rights that ordinary, human citizens have: the right to own property, the rights to free speech, the rights to sue other citizens, and also the government in courts. However, they are legally set up to maximise the profits of their own shareholders, and not for producing benefits for society. Directors of the Boards of modern business corporations are responsible for ensuring that the corporation generates profits for shareholders and for the distribution of those profit amongst the shareholders equitably. Like the East India Company, they have a limited liability. They are not accountable for the impacts of their operations on society and the environment. 

At the beginning of the 21st century, the mantra that the “business of business must be only business” had taken over economics and public policy around the world. “Ease of doing business” became the measure of a governments’ performance, with governments ranked by the World Bank, and progress of “deregulation” of business rewarded. The “ease of living” of common citizens, especially those at the bottom of the economic pyramid, became secondary. 

The theory was that wealth would trickle down. However, wealth has been gushing upwards. Inequalities in monetary wealth have increased obscenely. The richest persons in the world have billions of dollars in their accounts, while the poorest have none. The poorest find it impossible to cross borders, stuffed in boats and trucks, seeking better opportunities for their families, while the money of the rich is given more freedom to flow across borders to make even more money for them. 

India joined the liberalisation brigade in 1991. Dr. Manmohan Singh, who was the finance minister is recognised is the liberator of business corporations from pesky licensing and trade controls. De-regulation unleashed the animal spirits of Indian entrepreneurs. Their companies’ revenues and profits grew. Promoters and CEOs became millionaires and even billionaires. When “India was shining”, as it was described in those years, the CII invited Dr. Manmohan Singh to its annual meeting in 2008, when he was the Prime Minister. He was their economics’ guru, and they invited him to share his wisdom, like Krishna to Arjuna in Kurukshetra. 

I will read some passages from Dr. Singh’s speech. He said:

“In a modern, democratic society, business must realise its wider social responsibility. The time has come for the better-off sections of our society—not just in organized society, but in all walks of life—to understand the need to make our growth processes more inclusive; to eschew conspicuous consumption; to save more and waste less; to care for those who are less privileged and less well off; to be role models of probity and moderation. I invite corporate India to be a partner in making in making ours a more humane and just society”. 

Dr. Singh provided the assembled leaders of corporate India a Ten-Point Social Charter. I will read out two points from it.

“First, have a healthy respect for your workers and invest in their welfare. In their health and their children’s education, give them pension and provident fund benefits, and so on. Unless workers feel cared for at work, we can never evolve a national consensus in favour of much needed more flexible labour laws aimed at ensuring that our firms remain globally competitive.”

Skipping to the fourth principle in Dr. Singh’s charter.

“Four, in a country with extreme poverty, industry needs to be moderate in the emolument levels it adopts. Rising income and wealth inequalities, if not matched by a corresponding rise of incomes across the nation, can lead to social unrest.”

Let us review what has happened since Dr. Singh’s plea to corporate leaders on these two points.

Tragically, even the best of Indian companies, some even in the Tata Group, have adopted the practice of hiring contract labour to do regular work. These contract workers work alongside regular employees but are paid much less for doing the same work. This is a clear violation of the fundamental principle of equal pay for equal work. Moreover, these workers on so-called “flexible employment” terms do not have any social security. 

No doubt, this unethical practice helps companies to reduce their costs. But not only is it unfair; It also does not help companies to build the skills they need to remain competitive in future. Skills are built on the job. Human beings are the only “appreciating assets” any company has. The values of all other capital assets—plant, machinery, and buildings—will depreciate with time. Only human beings can increase their own value if they are motivated to and enabled to. 

J.R.D. Tata and Sumant Moolgaokar, Vice Chairman of the Tata Group, with whom too I had the privilege to work for many years, knew this. In fact, Moolgaokar called the new TELCO factory in Pune (now Tata Motors), “The Learning Factory”. He said that young Indians, mostly fresh out of college and schools, would work together there in various roles, as skilled workmen, designers, and young managers, together learning new skills on the job. And together showing the world that Indians could produce engineering products as well as, and even faster than companies in the advanced world. 

To prove they could, in their “Project Jupiter”, as they called it, they designed, tested, tooled-up, and produced a new light commercial vehicle, the Tata 407, in 18 months. They beat the four largest Japanese companies the Government of India had permitted to sell in India when it opened the Indian truck market to foreign competition in the early 1980s. 18 months was a world record for a new product development process. The Japanese, who were the world’s best then, took 36 months, and the Europeans much more. 

Sumant Moolgaokar was awarded the prestigious Sir Jehangir Ghandy Medal for Social and Industrial Peace in 1984. I will read a few lines from his acceptance speech. He said:

“When men and women take pride in their skill or craft and stive to perfect it they give scope to their creative impulses where one man’s gain is not another’s loss. There is nothing new in this source of human satisfaction. It has long been established that people enjoy exercising their innate and trained abilities and that this enjoyment increases as the abilities become more complex. If with faith in them, you ask our men and women for the best, they rise to your belief in their worth and create a momentum towards improvement that results in high standards in many things they do.”

Human beings are not just hands and legs with a computer attached. They are living beings with hopes, and dreams, and aspirations, and a will to learn and make their lives better. Automation can replace only the hands and legs, and the computation ability of human beings. It cannot create the human spirit. 

Replacing human beings in enterprises to save costs and improve efficiency is the wrong strategy for competitiveness in India. Capital is more expensive in India than in rich countries. On the other hand, human beings are willing to work for much less money in India. Young Indians can be the source of a sustainable competitive advantage for Indian enterprises provided they are treated as the appreciating assets of an enterprise and nurtured, as Moolgaokar did. 

The other point in Dr. Singh’s Social Charter for Industry was: “Resist excessive remuneration to promoters and senior executives and discourage conspicuous consumption (because) rising income and wealth inequalities, if not matched by a corresponding rise of incomes across the nation, can lead to social unrest.”

I return to the headline article in the Times of India that I mentioned at the beginning of my lecture with the pictures of Dhirubhai Ambani and J.R.D. Tata. 

J.R.D. Tata, the chairman of India’s largest industrial enterprise lived in an apartment on Carmichael Hill in Bombay. He often drove his own car back from office. On the same hill, not far from where Mr. Tata lived, the successor of Dhirubhai Ambani has built one of the most expensive and ostentatious homes in the world for himself. There it stands towering above the slums beneath in which thousands of hard-working Indians live. It is a picture of capitalism that is not improving the world for everyone; only improving the world for the very rich. 

Do not pay yourselves too much, Dr. Singh said. Sadly, the differential between the compensations of CEOs and other C-level executives in companies has soared. From a differential of around twenty times, between top and bottom salaries in the 1980s, it has increased to about three hundred times. Could it be that top executives have generally become fifteen times smarter than they were, while workers have not learned and improved at all? 

Differentials between very high compensation levels at the top, with high salaries and generous stock options, and low wages at the bottom in temporary and contract work without social security, have become vulgar around the world. In the US, even the President of the USA stood with unions this year, demanding that auto companies treat their workers fairly. Top executive compensations had increased through the Covid disruptions, while workers had been asked to tighten their belts to enable the companies to survive. The time has come, even in the US, to heed Dr. Manmohan Singh’s advice to CII in 2008. The ethics of capitalism need reforms. 

The first lesson from Gandhiji for all business leaders and policymakers is to heed the Gita. It says: “You have a right to do good work, but not to selfishly enjoy the work thereof”. The fruits belong to everybody. 

This is the concept of ‘Trusteeship”. You have been permitted to manage society’s resources, which include its natural resources. You are not the owner of these resources: They belong to everybody. You must return the wealth you produce to society. 

The second lesson is the principle of Antodaya. Gandhiji gave a talisman to all leaders. He said, whenever you make a policy or plan, consider what benefit that policy or plan would give to the poorest person that they know. Let that be the judge of whether you have a good policy or a good plan.

The third lesson is to “Be the Change You want to see in the World”. The world is going to continue changing and so will you. 

Gandhiji’s autobiography is called, “The Story of My Experiments with Truth”. He wanted to make the world better for everyone. To do which he knew he had to be a better human being and a better leader himself. 

He kept a diary of whatever he observed around him that bothered him, and he wondered why? He kept his mind open to learn from everywhere. As he said, I will keep all the windows of my house open so that the winds can blow in from everywhere. But I will not allow them to sweep me off my feet. I will be anchored by my ethical values. 

Sadly, I must say, many wealthy people now live in “bubbles”, in their physically, and intellectually gated communities. They have hardly any connection with poor people. For them, poor people are only numbers in economists’ poverty lines and mathematical equations. 

Finally, my personal advice to you as you set out on your journeys of life. 

Always be curious. Keep learning. When you stop learning, you stop being alive. Then you are only adding years to your life; but no more life to your years.

Learn to look beneath the data. Learn to listen to the minds of real people, including your own. Listen especially to “people not like yourself”.To students and experts in other disciplines. To people with different religions. To people from different cultures. Listen to them. Learn how they see the world. Understand why they believe what they believe. 

As you listen to them with an open mind, you will begin to understand the limitations in your own worldview, and discover the biases that you have, which make you a lesser person than you can be. 

Be a life-long learner. Always curious about why things are the way they are: good things and bad things. Understand the world around you. It is shaping you, and you can shape it to make it better for everyone, provided you follow the three principles:

1. Anantodaya

2. Be the Change you want to see in the World

3. You only have a right to the work; not the fruits thereof.