Some accomplished chief financial officers of established companies like Tata Consultancy, Tata Chemicals and KPMG set up a think tank as a body that would engage with relevant audiences—India Inc, regulators, administrators—to create and nurture better-governed enterprises. After all, CFOs have a strong C-suite role and influence on enterprise promotion and development. I recently participated in a CFO Board event.
CFOs have a crucial role in nurturing ‘enlightened capitalism’ in their companies. Enlightened capitalism enterprises meet four criteria: (i) they are respected and loved (try to list a score in India), (ii) they are focused on longevity as an effectiveness marker while protecting economic efficiency, (iii) they create shared wealth for stakeholders rather than create endless pink-paper controversies, (iv) they act to be long-living enterprises.
Examples are well-known giants like TVS, Murugappa, Godrej, Tata, Bajaj. Or lesser-known companies, who act as ‘small giants’—medium in size, but giants in nurturing community-oriented, ethical practices, such as PSG of Coimbatore, Nalli of Chennai and Malayala Manorama of Kerala.
There is nothing novel about ‘enlightened capitalism’, nor is the expression an oxymoron. Indeed, it has been an essential component of traditional Indian trading companies for centuries. Illustratively, think of Kutchi Bhatias, Memons, Marwaris, Shikarpuris, Chettiars—each has a strong trading tradition as well as a record of generous merchant charity. Even in the Sangam period, the generosity of traders has been described in works like the Silapathikaram. I refer to this as the ‘Indian way’—part of a wider eastern tradition of doing business.
The Indian way follows the four-point Vedantic teaching, summarised from Swami Vivekananda’s Chicago speeches of 1893: be self-aware, protect the resources that help you do business, serve others before serving yourself, and act firmly but with compassion. In the Zoroastrian tradition, they use the Avesta invocation of huma, hukta, hvarshta (good words, good thoughts, good deeds).
Hopefully, the CFO board can develop the idea of ‘enlightened capitalism the Indian way’ by preparing a thought paper on how India can nurture many firms with rich perpetuity valuation.
The Living Machine Institute of Austria has carried out back-tested research over a decade on this with India’s top 100 companies. They found a link between companies that nurtured their life force and ability to build up a reservoir of perpetuity value.
As firms seek growth consistent with such ideas, acquisitions appear important.
Acquisitions in domestic and international markets pose new risks for the enterprise. Since 2018, it is reported India registered about 600 mergers and acquisitions transactions valued at $50-60 billion each year. Indian firms can grow in several ways—by expanding per capita consumption among the present customer base, and by diversifying their product, domain, or market to new customers.
However, for success, Indian firms must have globally relevant products (tea, packaged basmati rice) or must own intellectual property (brands or capabilities like yoga/ayurveda), or strengthen market position by overseas acquisition of markets. For example, Daewoo Trucks acquisition by Tata Motors and Novelis acquisition by Aditya Birla Group. Assuming a sound and analytical business rationale has been internally articulated by the acquiring company, additional risk mitigation also needs to be managed.
When Tata Motors acquired Daewoo Trucks in South Korea, Managing Director Ravi Kant sensed an understandable reluctance to be acquired by an Indian company. The team undertook several activities—formal communications, demonstrating their capabilities, and in due course, even an Indian cultural evening—as part of multi-pronged efforts to win over the Daewoo employees rather than hard-fist them.
When Tata Chemicals acquired soda ash manufacturer Brunner Mond in the UK, the employees exhibited a Western posture: you acquired us, so tell us what you want us to do. CEO Prasad Menon and CFO P K Ghose responded that Tata had acquired Brunner Mond to better fulfil employees’ aspirations for their company. They posed the question, “How would employees like Tata to support Brunner Mond to attain its true potential?”
The same happened when Tata Motors acquired JLR from Ford Motor Company. The communication from the Tata leaders was not that of a conqueror or coloniser but of a collaborator with capabilities.
History suggests this was indeed an approach among some eastern empires. The Persian empire, the largest of the era at its peak, ruled from Greece to Central Asia from 550 BCE till about 330 BCE. It appears Persian rulers like Cyrus, Darius and Xerxes were largely tolerant of the conquered people. They allowed them to retain their language, religion and customs.
This changed rapidly during the last two millenniums and the customs of the conqueror were imposed on indigenous people. Consider the European conquest of North America, Spanish and Portuguese conquest of South America, and British conquest of Australia and New Zealand.
In contrast, think of the Turkish, Central Asian and British colonisation of India for over 1,000 years, during which ‘the Indian way’ survived. That is why seeking growth must be accompanied by an ‘Indian way’.
(Views are personal)
(rgopal@themindworks.me)
R Gopalakrishnan | Author whose latest book, Jamsetji Tata: Powerful Learnings for Corporate Success, is co-authored with Harish Bhat