Thus spake Gates

Regular leaders of the blog know that this blogger is an unabashed admirer of Bill & Melinda Gates. He is of the opinion that they must be sainted - for they have have done more good in the world than many, if not most, religious leaders.

They publish an annual letter which is like a "State of the Union address" in their field. This time they have answered in their letter, the ten toughest questions they get. And yes, Donald Trump is one of them, but if you expect an incendiary answer, well, you don't know the Gates.

I consider their Annual Letter as required reading for any human being with a heart. Here is this year's letter.

Its a bit different as it addresses questions, some of which are not developmental in nature - like Trump, or what do they do when they disagree. But it is , as always, an interesting and often motivating read.

May I exhort you to read this one, and then every one of their previous 10 letters. It is a far more productive use of your time, than reading you know what !

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A tragedy all around

If it wasn't so sad, it would have been a classic case study where everybody was at fault. The Marikana miners strike in South Africa is a disaster where every party - the miners, the company, the unions, the police and the government deserve censure for the way they have conducted themselves.

Here is what happened. One of the platinum mines belonging to the mining giant Lonmin is in the Marikana area in South Africa. In early August there was a flash strike over pay demands. The situation escalated badly and resulted in a violent incident on 16th August when police firing resulted in 34 miners being  killed and 78 injured. Prior to this 2 police officers had also been killed. Since the infamous Sharpeville massacre in 1960, this was the worst violence in South Africa, and certainly the blackest day in the post apartheid era.

The company Lonmin deserves some of the blame. Its workers are poor and live in shantytowns without any decent housing. Since 2001, the price of platinum has quadrupled in the market. And yet the wages of the workers have risen by only a small amount. When profits are soaring and there are not commensurate benefits to employees, the situation is ripe for unrest. Lonmin also appears to have done little by way of social responsibility, and the little it did was often the subject of political patronage. It is impossible to be in an island of profits when surrounded by poverty. With such inequality, the flashpoint was inevitable.

The strike by workers was over a demand to triple their wages. Those of us in India, who remember Datta Samant would recall such absurd demands and militant action. No company is going to triple  wages in one go. There is also no doubt that miners resorted to some violence - two policemen were killed and it appears that their weapons were snatched and used against the police.

The unions were heavily politicised.  The dominant union was affiliated to the ruling ANC and an outsider union of the opposition was trying to break in. One upmanship on taking extremist stands and violence seems to have resulted.

The police have certainly overreacted. Yes two of their own were killed and they seem to have extracted revenge.  They were corralling workers with barbed wire and when threatened, resorted to extreme force with live ammunition. But was the force justified ? There is hardly any industrial dispute in the world where 34 people have been killed.

The government has behaved awfully. For long it has been indifferent to the appalling inequities in South African society and a small black elite has gone very rich through massive corruption. After this incident happened, the public prosecutor arrested some 270 striking miners and charged them with the murder of the 34 under an apartheid era law! The outrage was universal, and they have since had to withdraw and release the miners.

The real tragedy is on those who died - miners and policemen - and the injured. Nothing is going to bring back the dead. Is any business worth the loss of so many lives. And is any cause for agitation worth this price ?

South Africa has a real problem with inequality and seems to have no sensible way to tackle it.  It is of course, a global problem with no easy answers, but in South Africa the problem can be seen at its most acute form. If it does not find even a partial answer, the spectacle of Zimbabwe looms.

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The curious case of Ben & Jerry's

Do you like Ben & Jerry's ice cream? Most probably a resounding yes.  But this post is not about its ice cream. Its about what it has done on Tuesday.

What it did on Tuesday was to go to New York's Zuccotti Park where the Occupy Wall Street protesters are camped and dole out free ice cream to all of them. Nothing spectacular about that, except that it went on to publicly declare its support for the protesters. It also published a statement from its Board of Directors that the company has the deepest admiration for the protesters and is standing with them. You can read what the Board said here.

Ben & Jerry's has long been a left leaning company promoting a variety of causes. Its founders Ben Cohen and Jerry Greenfield started the company with a clear social and sometimes political agenda. So should this latest action be surprising. Yes, because, Ben & Jerry's is no longer an independent company. It's a subsidiary of Unilever, a global multinational company, perhaps the very sort that the Occupy Wall Street protesters are agitated against (that is, if somebody can decipher what exactly they are protesting about).

Was Unilever ambushed by the act of Ben & Jerry's ? Tough to believe so - for the Board of Ben & Jerry's has Unilever representatives, including an ex Director of Unilever itself. Unilever has issued a statement that it is neutral to social campaigns and has no comment to make, but that is a blithe remark considering that  its subsidiary is indeed making a very loud statement.

How far do you let your subsidiary act on its own ? Usually subsidairies are simply legal shells and the parent runs them as one corporate whole, unless there are external shareholders. But Ben & Jerry's is different. Perhaps because of its historical brand image. Perhaps because of covenants agreed with the founders at the time of acquisition to allow the company to have a social agenda. But still, the latest action seems a step too far. I won't be surprised if the upstart is reined in.

What of the protestors ? They are objecting to evil corporations; right ? Do they want the support of one ? Some of them expressed mixed feelings. They said they were uneasy about corporations muscling in on their patch. But they also said, they could not turn down a free ice cream !

Very curious.

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Don't vote for XYZ Inc.

Murray Hill is running for the US Congress. At first glance, nothing seems to be wrong with that – surely anybody can run for Congress. But then Murray Hill is unique and a first. For its full name is Murray Hill Inc. It’s a company; not a person. An interesting article in the Economist (click here) examines this quirky issue superbly.

This is a consequence of a landmark US Supreme Court judgment in January. In a bitterly divided 5-4 decision, the Supreme Court ruled that the First Amendment free speech rights extended to corporations. The biggest impact of this ruling would be that no limits can be placed on political contributions by businesses. The impact of business on politics is bound to increase, and this has generally been considered to be not a good thing.

But another consequence of the decision seems to be what Murray Hill is contemplating. It faces huge hurdles for sure – there must be a myriad of other laws that require a candidate to be of flesh and blood. As The Economist says, Murray Hill is sure to fall foul of one requirement– all candidates have to be 18 years of age or above and Murray Hill Inc is only 5 years old ! In any case, it has little chance of getting elected – its slogan is “put people second” and “create the best democracy money can buy”. After all Murray Hill is a PR company trying to gain some publicity.

But underneath this lurks a real issue, The rather blasé view in The Economist that companies can be pressurised to act responsibly in engagement with the political process is dangerous. Businesses will not act responsibly – they will act precisely in their own self interest and to hell with everything else. After all that is their charter. They will lobby furiously for breaks; they will compete for pork; they will finance candidates who will do them favours after getting elected.

The Supreme Court decision has raised alarms across the US. The Court appears to have become as bitterly divided as the US nation itself – there is a big drift to the extremes on both sides of the political divide. All the “conservatives” on the bench voted for the decision. All the “liberals” dissented.

In my view businesses are crucial to economic activity, but must remain there. There is grave danger in allowing them to be part of the political process. Businesses are not members of society – only people are. Businesses already influence political processes far too much because they finance much of it. By their very nature they cannot aid sensible public policy. They should not be allowed anywhere near it.

There is grave danger in voting for XYZ Inc.

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In defence of business

The word business is nowadays accompanied by a metaphorical holding of the nose. Post the financial crisis, businessmen would probably rank just above bankers and below more traditional last placers like real estate agents, in the list of reputable professions. Readers of this blog would know that the author is a staunch defender of business and advocates the view that the profession is unfairly maligned. An earlier post had touched on this subject.

It was gratifying to read The Economist’s Schumpeter column, The Silence of Mammon, which argues that business people should stand up for themselves. The article recounts the two arguments it says proponents have put forth in defence of business – that many firms are devoted to good works and that businessmen have done more than any other institution to advance prosperity. It opines that these are not enough and puts forth three more arguments to counter the critics of business who have dominated the discussion on corporate morality – that business is a remarkable exercise in cooperation, that business is an exercise in creativity and that business helps maintain political pluralism. All excellent arguments, in an eminently readable article.

I wade into this debate with unbridled enthusiasm. I have little sympathy for those who taint businesses as immoral with a broad brush. At the cost of oversimplifying a complex matter, I set out a central theme in defence of business and industry.

I come from a poor country, India, and now live in another one, China . I have seen how degrading poverty is to humanity. And it is China that I want to present in defence of business. In 1981, 84% of China’s population of a billion plus was below the poverty line of $1.25 a day. In 2005, in the same China, the percentage of population below the same poverty line had decline to just 16% (source : World Bank working paper 5090). Yes SIXTEEN per cent. That equals to 700 million people who have climbed above the poverty line. We all know how this was done.

Show me any other way of pulling 700 million people out of poverty and I’ll abandon all defence of business.

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A great organisation

The house of the Tatas has been synonymous with values which are unique in the annals of business history. This post is about why they more than deserve their illustrious reputation.

This is from an e mail doing the rounds – these are apparently notes taken by Dilip Ranjekar , CEO of the Azim Premji Foundation. I haven’t requested permission from Dilip, or the persons who forwarded me this mail, to post this, but I am sure none would mind me spreading a story that ought to be told and will bring a lump to your throat. Here it is

Last evening, I had a dinner meeting with HNS in Goa

He narrated the 26th November 2008 terror attack on Taj Mumbai and there were some important points.

Terrorist entry

1. They entered from the Leopold Colaba hotel entrance and also from the northern entrance - spraying indiscriminate bullets on the Taj security personnel and guests in general.

2. Though Taj had a reasonable security - they were surely not equipped to deal with terrorists who were spraying 6 bullets per trigger.

3. The strategy of the terrorists was to throw chunks of RDX in an open area that will explode and burn - creating chaos so that the guests and staff run helter skelter so that the terrorists could kill them. The idea was to create maximum casualties.

4. There were several critical gatherings and functions happening in the hotel on that day - a Bohra wedding, global meet of Unilever CEOs and Board
members and 2 other corporate meetings were being held in the hotel - besides the usual crowd.

5. The firing and chaos began at about 8.30 p.m. and the staff including employees on casual and contract basis displayed exemplary presence of mind, courage and sacrifice to protect the guests who were in various halls and conference rooms.

Stories of Staff Heroics

1. A young lady guest relation executive with the HLL gathering stopped any of the members going out and volunteered 3 times to go out and get things when the situation outside the hall was very explosive and she could have been easily the target of the bullets

2. Thomas George a captain escorted 54 guests from a backdoor staircase and when he was going down last he was shot by the terrorists

3. There were 500 emails from various guests narrating heroics of the staff and thanking them for saving their lives

4. In a subsequent function, Ratan Tata broke down in full public view and sobbed saying - "the company belongs to these people". The wife of Thomas George who laid his life saving others said, she and the kids were proud of the man and that she did not know that for 25 years she lived
with a man who was so courageous and brave

5. The episode happened on 26th November, a significant part of the hotel was burnt down and destroyed - the hotel was re-opened on 21st December and all the employees of the hotel were paraded in front of the guests

6. It was clearly a saga of extra-ordinary heroics by ordinary people for their organisation and in a way for their country. The sense of duty and service was unprecedented

7. The young lady who protected and looked after the HLL guests was a management trainee and we often speak of juniority and seniority in the organisation. She had no instructions from any supervisor to do what she did

* She took just 3 minutes to rescue the entire team through the kitchen
* Cars were organised outside the hotel as per seniority of the members
* In the peak of the crisis, she stepped out and got things for the guests

8. People who exhibited courage included janitors, waiters, directors, artisans and captains - all levels of people

The Tata Gesture

1. All category of employees including those who had completed even 1 day as casuals were treated on duty during the time the hotel was closed

2. Relief and assistance to all those who were injured and killed.

3. The relief and assistance was extended to all those who died at the railway station, surroundings including the "Pav-Bhaji" vendor and the pan shop owners

4. During the time the hotel was closed, the salaries were sent by money order

5. A psychiatric cell was established in collaboration with Tata Institute of Social Sciences to counsel those who needed such help

6. The thoughts and anxieties going on people's mind was constantly tracked and where needed psychological help provided

7. Employee outreach centers were opened where all help, food, water, sanitation, first aid and counseling was provided. 1600 employees were covered by this facility

8. Every employee was assigned to one mentor and it was that person's responsibility to act as a "single window" clearance for any help that the person required

9. Ratan Tata personally visited the families of all the 80 employees who in some manner - either through injury or getting killed - were affected.

10. The dependents of the employees were flown from outside Mumbai to Mumbai and taken care off in terms of ensuring mental assurance and peace. They were all accommodated in Hotel President for 3 weeks

11. Ratan Tata himself asked the families and dependents - as to what they wanted him to do.

12. In a record time of 20 days, a new trust was created by the Tatas for the purpose of relief of employees.

13. What is unique is that even the other people, the railway employees, the police staff, the pedestrians who had nothing to do with Tatas were covered by compensation. Each one of them was provided subsistence allowance of Rs. 10K per month for all these people for 6 months.

14. A 4 year old granddaughter of a vendor got 4 bullets in her and only one was removed in the Government hospital. She was taken to the Bombay hospital and several lakhs were spent by the Tatas on her to fully treat her

15. New hand carts were provided to several vendors who lost their carts

16. Tata will take responsibility of life education of 46 children of the victims of the terror

17. This was the most trying period in the life of the organisation. Senior managers including Ratan Tata were visiting funeral to funeral over the 3 days that were most horrible

18. The settlement for every deceased member ranged from Rs. 36 to 85 lacs in addition to the following benefits:

* Full last salary for life for the family and dependents

* Complete responsibility of education of children and dependents -anywhere in the world

* Full Medical facility for the whole family and dependents for rest of their life

* All loans and advances were waived off - irrespective of the amount
* Counselor for life for each person

Epilogue

1. How was such passion created among the employees? How and why did they behave the way they did?

2. The organisation is clear that it is not something that someone can take credit for. It is not some training and development that created such behaviour. If someone suggests that - everyone laughs

3. It has to do with the DNA of the organisation, with the way Tata culture exists and above all with the situation that prevailed that time. The organisation has always been telling that customers and guests are #1 priority

4. The hotel business was started by Jamshedji Tata when he was insulted in one of the British hotels and not allowed to stay there.

5. He created several institutions which later became icons of progress, culture and modernity. IISc is one such institute. He was told by the rulers that time that he can acquire land for IISc to the extent he could fence the same. He could afford fencing only 400 acres.

6. When the HR function hesitatingly made a very rich proposal to Ratan - he said - do you think we are doing enough?

7. The whole approach was that the organisation would spend several hundred crore in re-building the property - why not spend equally on the employees who gave their life?


THIS is a great organization, full of great people.

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Is there nobility in business ?

Are some sectors of business activity more "noble” than others ? Pure capitalism is completely agnostic in the softer emotions. But humans are not “pure”. They have emotions. So it is , but natural, that they rank some spheres of activity as more noble than others. Show me a human being who’ll say that being a real estate agent is better than being a teacher.

It is rare, but sometimes you come across something you read that perfectly matches with what you have been thinking at the back of your mind, but never expressed. For me, The genuine nobility of manufacturing by Luke Johnson was a light turning on moment. Here’s an excerpt from the article that perfectly captures a nagging doubt I’ve been having

“In almost any country, dealing in property, shares or companies will likely lead to riches far faster than running factories to produce the goods we all need. I would love an economist to explain to me the flaw in our system that leads to this far from ideal outcome.

Most intelligent entrepreneurs and executives desire to invest their work with meaning. They like the idea of improving the world while earning a living. And many of us who mostly shuffle paper secretly admire those in the Hard Industries, who manufacture things, in spite of all the obstacles”.

Without manufacturing, there will be no economic activity. Most of the service industry is anyway targetted to service manufacturing. And yet society today has completely devalued manufacturing, to the point that its almost a dirty word.

I’ll stop. Luke Johnson has raised the issue far better than I ever can. I would love to hear what you think. Is it one of those fanciful, romantic, but impractical thoughts that tends to come with old age ? Or is it something you, young people of the world, relate to, too ?

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Socially Responsible Consumer

A lot has been, and will be said about the social responsibility of businesses. But what about the social responsibility of consumers ? This article set me thinking

Each one of us, as consumers, have the power to make or break businesses – every time we buy, or not buy, something, we hold in our hand the fate of every business in the supply chain of that product. Should we not exercise this power in a “responsible” way.

Most of our purchasing decisions are purely dictated by what is good for us – cheapest price, the best quality, whatever. Nothing wrong with that. But its worth a thought if some other criteria might also come into the equation.

The area where consumers are beginning to act is climate change. Like buying locally made goods. Shunning products that are harmful to the environment (like gas guzzling vehicles). Carbon offsets in flying. And so on.

A few companies have tried to compete on a social theme. Companies like The Body Shop, Ben & Jerry ice cream, etc. But in the end they have been swallowed by traditional big businesses. That’s simply because consumers and shareholders haven’t attached enough of an importance to their social theme. But I believe that’s changing rapidly in today’s world.

It’s an interesting thought. As a consumer, why do we not consider products (without a too material sacrifice on quality or price) that either do “good” themselves, or come from companies that do “good” more than others. Admittedly it’s a difficult concept and we may not know enough to make that choice. Many a time, what appears on the surface isn’t true either. But if this starts to get into consumers’ mindset, things will change rapidly.

So perhaps the ball is in our court.

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CSR in the developing world - Volunteering

What's the most precious thing in the world ? Depending on the context and the person, you can get hundreds of answers. If I ask the question in the context of Corporate Social Responsibility - What is the most precious thing a company can give to the community?, an expected answer would be money. It would not be mine. Mine would be time.

My eyes were opened on how organised volunteering has become in some parts of the world from Chris Jarvis' excellent blog - Realizing Your Worth. Chris is a practitioner; that's his business and you can see from his posts, how much can, and ought to, be done.

What social organisations often lack are some specific skills and numbers of committed workers. They have passion in plenty. They are committed to causes in ways I can only marvel. They usually feel they are short of just money. No; they are often short of organisational and management skills and of specific technical skills. Very often such organisations have grown from a small group of extremely committed individuals who built an operation through sheer passion. Now its become a largish organisation. It needs support. Step forward corporate volunteers.

The best a company can do, is to encourage its employees to give their time to causes and organisations it supports. For you and me, it can be the way to a very fulfilling experience. How many times have we felt we wanted to do something to help somebody less privileged, but haven't got around to doing it meaningfully. Sometimes we write a cheque. Sometimes we do some bits and pieces. But in a sustained and effective manner - only a committed few. But for all of us, it can give meaning to the work we do. We use our skills and knowledge, not just for business, but also for the community around us. A company can give the framework and the means to make it happen. It will be rewarded in employees who will affiliate to the business with more than a contractual relationship.

Nowhere is this truer than in the developing world. Volunteering is at its infancy, at best. Its where the need is highest and where the maximum difference can be made. So companies - establish a formal volunteering programme. Let it be run by your employees. Run this like any other business initiative - in the most efficient manner possible. Give a little time off for your employees to participate in the programme. It can be the best activity in the CSR space you could do.

I know its not easy for us to volunteer out time. After all, in our parts of the world, the working day is usually 12 hours at the office. And then the 2 hour commute back home. But ..... Take a deep breath. Enrol as a volunteer. It may change our lives.

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CSR in the developing world - alleviating poverty

If you are a company doing business in the developing world, chances are that you are not far away from poverty in a very basic form. You cannot, and should not, be an island behind electrified fences. And at the same time, its not your job to solve global hunger. What can you do ? What should you do ?

You are doing something, by the very fact of your existence. You provide jobs to people. There is no better way of fighting poverty than that. This is the greatest good that companies can do. Locational choices on where to operate are dictated by a whole host of considerations – nearness to market, availability of inputs, government incentives, cost structures, etc etc. I suggest that one more criteria be added – poverty around the location. Other things being equal, go to a place with higher poverty. Perhaps go to places where others haven’t been. Go outside of the big cities. This isn’t an ideological rant. In my business life, I’ve been part of many many locational choices. Our best decisions have been when we have gone to unlikely places. My greatest emotional satisfaction from many a job has been the job opportunities we have given to people who otherwise might have had none.

Having gone there, a company would do well to get involved in the local community. Not give money – in my experience nothing destroys a community more than sudden wealth. But link up in ways that are natural to your business. Encourage your employees to volunteer in building skills in the community. If you run a factory and have a captive power plant, sell electricity at cost to the neighbourhood (all too often they have none). Give water from your borewell. Source inputs, if you can, locally. Train them to get you those inputs. Fund local entrepreneurs as a venture capitalist to set up ancillary industries to supply you inputs. Extend the health education you give your employees, to the local community. And so on. Above all, don’t build electrified fences !

The greatest good that a company can do to the community is to further economic activity. For there is no way out of poverty than to create economic opportunities. Help local government create the right climate for attracting more industries. Be a vigorous spokesman for your community in attracting others to come. Run the business on highly ethical lines – it rubs off on everybody around. For decades, Tatanagar in India, was an oasis of calm right in the heart of a violent region, largely because of the values Tatas brought to that place.

And one of the best acts you could do is to encourage volunteerism by your employees. That’s a theme I’ll pick up tomorrow.

But please, oh please, do not become an island of wealth, bounded by a 15ft high wall, in the midst of abject poverty. Quite apart from it being morally difficult to stomach, it is also not sustainable. One day for sure, somebody will torch your fence.

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Corporate Social Responsibility in the developing world

I’m posting a few pieces on Corporate Social Responsibility in the developing world. I had posted my views on what companies should NOT do here and what they could do here, a few months ago.

I’m picking up the theme in relation to the developing world, because the circumstances and the maturity of CSR are , I believe, different in the developing world.

In my book, the first role of a socially responsible organization is to follow the law. This is not so simple in the developing world as it might seem.

The first question is “what law ?”. The laws of the country you are operating in ? The laws of the country you are headquartered ? You say it should be the law of the country in which you are operating in. But what if the law is silent on something which is taken for granted in other parts of the world – say for eg pollution. If the standards are lax in the country , would you follow only those standards, or would you follow those in the developed world ? Is "pollution outsourcing", which the ship breaking industry or the leather industry does, acceptable ? What if its impossible to follow the standards of the developed world – this is what happened to the cola companies in India. The pesticide residue in their soft drinks was found to be higher than European norms. But the problem was not their doing – the pesticide residue in ground water was higher in the first place. Now what do they do ?

The second problem for companies come when the law in a country is in contradiction with both the law in their homeland and the values they believe in. When apartheid was official policy in South Africa, do you segregate races in your office ? Do you follow the laws relating to women in Saudi Arabia ? The easy answer is to say yes – you have to observe the laws of the country, but I am aware of companies which choose not to operate in a certain country because they cannot morally accept those laws.

The third problem comes when everybody is bending the law and it is accepted as common practice. Bribery (call it by whatever name) falls in this category. There are some parts of the world where it is not possible to operate without facilitation payments, commissions, “donations”, etc etc. What do companies do then ? They pontificate that they would never do these things, and yet, many very well respected global companies do this all the time (doing it through an agent does not absolve you of the responsibility).

The fourth problem is when its virtually impossible, or insane, to follow the law. I’m sure such a situation existed for most companies operating in Zimbabwe for the last 5 years, say in foreign exchange regulations. What do they do ? Pull out, or do what everybody else does – ignore the law ?

Not easy questions. I submit that an integral part of Corporate Social Responsibility is to decide a policy on these questions that a company can live with in its conscience. And one that will be seen by the communities they operate in as fair and ethical. In my earlier post, I had argued that this is a black and white case ; there are no shades of grey. I still think this is so for 90% of the cases But in 10% of the situation, I think grey is unavoidable.

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Trust : Why businesses lost it

Chris Jarvis has made a superb post in his blog Realizing your Worth on "Trust : Why businesses lost it and how to win it back."

He quotes Charles Handy, an Irish philosopher specializing in organizational management who wrote in his book ‘What’s a Business For’ in 2002 this prescient paragraph:

The markets will empty and share prices will collapse, as ordinary people find other places to put their money--into their houses, maybe, or under their beds. The great virtue of capitalism, that it provides a way for the savings of society to be used for the creation of wealth--will have been eroded. So we will be left to rely increasingly on governments for the creation of our wealth, something that they have always been conspicuously bad at doing.....Trust is fragile. Like a piece of china, once cracked it is never quite the same. And people's trust in business, and those who lead it, is today cracking."

Click here to read this superb post.

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Companies aren't bad creatures

Companies in general, seem to be disliked by the public. The larger the company, and the more global it is, the more it is disliked. Have you noticed how often somebody rails at "multinational corporations", with the word multinational being said as if it were some highly distasteful object. Why ? Do companies deserve this hate ?

There is a broad coalition of opinion against global companies. Politicians have a love hate relationship with companies. They love them when they open a plant in their constituency. They love them when they are successful. They hate them when they announce redundancies. They hate them when they get up to mischief. However, on the whole, over the last two decades, politicians, and governments, have tended to be much more favourable to companies.

NGOs and activists tend to hate most companies. To many, they are the embodiment of evil. The average Joe Public also does not like companies, although he may be employed in one. He often rants and rails against multinational corporations doing bad . There is often instant suspicion of a large company. He is much more tolerant of a small company, but a large company is usually seen as not good. Public opinion is not in favour of companies.

Why is this so ? I think the main reason is plain jealousy. Large global companies, are by definition successful and rich. Human nature invites jealousy of the rich. Companies can do very little about it other than to grin and bear it. Some humility can help. Unfortunately the word arrogance, rather than the word humility, comes easier to them.

A second reason is that companies are very public figures, just like political leaders and sportsmen are. All public figures will be held accountable to a higher standard than Joe Public. That's the law of nature. Witness how its perfectly acceptable for the average man or woman to commit adultery, but its an absolute no no for Bill Clinton to do so. Companies have to accept that they have to be as clean as possible, even when examined under the brightest lens.

A third reason is that most companies have failed in communicating effectively the good they do. Companies create jobs, they pay taxes, the enable you and me to enjoy products and services that would otherwise be impossible. The PR garbage they churn out is often unreadable, and more importantly, not believed. A much better communication strategy is in the company's own interest.

In 2004-05 Oxfam and Unilever jointly conducted a detailed study of the economic impact of Unilever’s operations in Indonesia. The conclusions were eye-opening, especially for Oxfam. Unilever in Indonesia supported the equivalent of 300,000 full-time jobs across its entire business, created a total value of at least $630m and contributed $130m a year in taxes to the Indonesian government. The lesson for firms is that they have been far too defensive about their contribution to society

A fourth reason is that in the past, companies have often solely focused on their mission - to generate profits. While this is no doubt their main mission, they haven't paid the same degree of attention to their other stakeholders. This is rapidly changing. Corporate social responsibility is now accepted as a very important area for companies and many companies have started to have good programmes in this area.

A fifth reason is that global companies have got caught in the crossfire of the battle for and against globalisation. Companies are the one institution that have truly gone global. Being a pioneer in globalisation, they have got caught in the debate as to whether globalisation is good or bad. Hence the anti globalisation protesters against companies. The defence for companies can be that while they are global and think global, they act local. They must be seen as true citizens in the communities they operate in. Without the deep bonds with their local communities, they will be seen as outsiders, and as we all know, when there is trouble its always the outsider on whom the first stone is thrown at.

I am hardly suggesting that companies are the bastion of virtue. They are not. Just like any other group, there are the good, the bad and the ugly. Many companies are guilty of appalling conduct and deserve the brickbats that are thrown at them. Some are out rightly criminal. But they can't be the representative of the corporate community as a whole. Its not right to paint the whole group with the same brush. There are many outstanding global companies. In fact there are more good than bad. They deserve a fair hearing. And a cuddle or two !

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Corporate Social Responsibility - What companies should do

Yesterday, I posted on what I believe companies should NOT do in the area of corporate social responsibility. I am a strong believer that companies must be very socially responsible. Today I write on what companies should do.

In my opinion, what companies can do, can be divided into three sequential levels. At the basic level, companies should first do what they are supposed to do - operate efficiently and reward all their stakeholders; shareholders, employees and customers. A company must follow the law of the land, in letter and spirit. It must not bend the law - its not OK to give bribes (called by whatever name and political donations and lobbying, come dangerously close to this), just because others are doing it. It must not be economical with the truth in what it says and reports - in accounting, in making product claims, etc. It must pay its taxes as per the law. Tax avoidance is fine; tax evasion is not. It should not take risks with safety - product safety and employee safety. These are the basics. They are black and white - there are no shades of gray. If a company does all this very well, I would term it being "adequately socially responsible". Unfortunately, in my view, very few companies would pass this test in its entirety. And therein lies the problem. Not doing well enough on the basics and instead doing an esoteric charitable act is actually being irresponsible, and falls into the category of washing away the sins, in my list of motives posted yesterday.

Once the basic level is assured, and only when the basic level is assured, a company could proceed to the intermediate level. Initiatives here ought to be linked to the business of the company in some manner. Only then would it be sustainable and effective.

A company could work with the community with whom its operates. This could be geographic - a company might wish to build infrastructure or invest in education in the locality it operates. This binds it to its employees and its neighbours. The Tata Group in Jamshedpur (actually called Tatanagar) is one example. Many American corporations had their roots in small towns, which were actually company towns in those days. Or it could be customer centric - if you are a medical company, you may want to be involved in disease prevention or health education activities. Or it could even be shareholder centric - a financial services company might want to be involved in educating on investing. In any form, this activity must be related to the business the company is in.

A second initiative is employee volunteering. Employees volunteer for activities they choose and the company assists in providing time off or in matching contributions they raise or in providing infrastructure. Activities could be anything the employees choose. Employees increasingly seek meaning in what they do and companies that encourage them to do more than just work on the job, become employers of choice. For a good post on volunteering by Chris Jarvis, click here.

A third initiative is helping disadvantaged sections of the society where they operate (minorities, physically challenged, whatever) to be educated, become skilled and get jobs. Also in this area is how companies handle layoffs, covered in one of my earlier posts - going beyond what is required legally and helping the affected employees to find employment. Jobs and job creation are one of the most socially responsible activities that companies can do and which is directly related to business.

The "advanced" level, in my view, would be companies that have weaved a social responsibility theme into their charter ; that's part of what they want to do. Only shareholders who are interested in the theme that this company propagates, become shareholders. Example of such companies that immediately come to mind are The Body Shop and Ben & Jerry. But its also true that such companies do not survive for very long - Body Shop got taken over by L'Oreal and Ben & Jerry by Unilever and despite claims by their new owners of protection of their social cause, this has inevitably got diluted. Maybe these were stepping stones. I believe there would come a time when such companies would flourish and thrive, independently.

More power to such companies. They would flourish if we as consumers prefer their products to others, other things being equal. Otherwise they will fail. As in all things in business, corporate social responsibility will succeed or fail, with the consumer.

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Corporate Social Responsibility - What companies should NOT do

A much researched and written about topic, where extreme views tend to sway with the season. My friend and ex colleague, Sandip Ghose wrote nicely about it a few days ago in his blog. I am posting here, a personal perspective, rather than a research paper !

That it is fundamental today for any business, large or small, is more or less a given. Motives differ. For some it’s the warm feeling of doing “good”. For some it’s a washing away of sins. For some it’s a risk avoidance measure, lest they be shot at by pressure groups. For some , its just the fancy thing to do – it seems to be a catching trend, so lets do it. For others its simply the way they want to do business. Whatever be the motive, it is here to stay and has to be given the most serious consideration just like any other part of the business.

The Economist argues that much of much of the initiatives in this area are often misguided and I agree. So my perspective begins with what a company should NOT do.

It should not simply donate money. The company’s money is its shareholder’s. If they want to make a donation, give them the money and let them donate. Its not the company’s business to donate, whatever be the cause, for its not its money. This is the Bill Gates approach – he donates; not Microsoft (at least not in any substantial way).

It should not undertake activity that is not somehow related to its business. Fighting AIDS in Africa is very laudable, but it has nothing to do with making and selling chewing gum in Japan. Activities which are completely unrelated are not sustainable.

It should not seek to impose a culture or expectations on the world – for example western companies seeking to influence matters such as free speech, right to unionisation, religious freedom or the Tibetan cause in China is completely unacceptable. Its none of their business. Equally enforcing work practices from one part of the world to everywhere else is inappropriate. Labour rights is fine, but do we want the French 35 hour working week everywhere ? What about the ease or difficulty of laying off people ? There cannot be global standards on these without reference to the local social, legal and practical considerations.

It should not embark upon initiatives without a full understanding of what its getting into. A classic case is bio fuels in the automobile industry. This seemed to be a good thing. Companies were pushed into promoting bio fuel usage. And what happened last year – price of food shot up and, at least, one of the reasons attributed to it was the amount of land being devoted to growing crops for bio fuels. These are ticklish issues, Society and governments should take calls on such tradeoffs and companies must follow. They must not lead. Its tempting for pressure groups to push companies because they are the easiest target,. This is wrong. It is governments, reflecting the society, who must decide, however messy that process might be.

And companies must not do it solely for the publicity. Unfortunately this is too often the case, prompted in part, by misguided regulations that require publication of work in this area. So if you have to say something, you have to do something, to say something. So do whatever is the easiest. Terrible way to "discharge" your social responsibility. Better not to do, rather than do something because it has got to be done.

There is a nice discussion with Daniel Franklin, the executive editor of The Economist who says “even well-intentioned activities of businesses can end up not doing any good at all in ways that might surprise". Click here to listen to the discussion (unfortunately requires a subscription).

Make no mistake – I am a passionate believer that companies must be very socially responsible. But I deliberately started with a post on what they should not do; simply to illustrate my point of view that everything that is good to do, is not necessarily good for companies to do.

Tomorrow, I’ll post on what I believe corporations should do.

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