'CEOs must be servants of society, not masters'

A Correspondent in Ponoma, California | October 29, 2007 10:56 IST

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In a recent address at the Ahimsa Center at California State Polytechnic University, Ponoma, Gopalakrishnan said the true purpose of business in a society is to give back to the community or the people from whom the businessmen make money.

"Where does a businessman makes his money from? He makes his money from people � those who buy his company's hamburgers, bus or airline tickets, clothes or even automobiles � and the cycle of money, like everything else in nature, has to be circulated. So, there has to be movement (of money)," Gopalakrishnan said.

Quoting William Hesketh Lever, the founder of Unilever, where he had worked for many years before joining the Tatas nine years ago, Gopalakrishnan recalled that the great entrepreneur said a year before his death that a businessman has to work like a bricklayer who lays out the streets and does the work with the knowledge that his work will always remain anonymous.

"Yet, centuries after he has done his work, people walk on that road with hopes in their heart, looking to new lands. Never once would they remember the person who made the road that made their journey possible," Gopalakrishnan said quoting Lever.

"I find that to be a touching expression. Mahatma Gandhi also said so, by the way, but I am using a Western metaphor to bring out the point," he said while delivering the talk on 'The Real Purpose of Business,' co-hosted by the Ahimsa Center and the Center for Business and Design at the California State University, Pomona.

Introducing Gopalakrishnan to the packed audience, Dr Tara Sethia, director of the Center, said it is not difficult to make a connection between business and various types of violence such as predatory lending practices, credit traps, cut-throat competition, workplace exploitation and harassment, discrimination and abuse, and, of course, the violence to nature and environment.

"The recent recalls of toys and tires, pet food, health care products, et cetera remind us about the potential that exists in the business world to harm fellow human beings, animals and the environment. Whether intended or not, many business practices do have violent consequences," she said.

"However, the connection between business and nonviolence is not easily made. It is true that many enlightened business leaders not only eschew exploitation and harm, but, in fact, actively embrace values of integrity, trust and transparency. Can the culture of Ahimsa inform modern day business practices? Can businesses become vehicles of compassion and nonviolence?" she asked.

"It is in this context that today's program has a special significance. It will help us appreciate a truly important, but generally unsuspected, connection between nonviolence and business, and the good that results or can result from this connection," Sethia said.

In his address laced with humour, many anecdotes and references to books from the Bhagvad Gita to Mitch Albom's Five People You Meet in Heaven, Gopalakrishnan sought to drive home the point as to how business leaders can rise to play a fruitful role in society and how business actions and practices could be grounded in values such as care, compassion, non-violence and courage.

He noted that long before the Unilever founder's talk about bricklaying, Jamshetji J Tata, when he was asked how he made so much money and that he must be a very smart guy, said if he made a lot money it did not mean that he was a smart guy.

"'It means somebody has put the money into me for me to be an instrument to redistribute this money to somebody else. I earned this money from the people of India. And therefore, the people of India I must return this money to,'" he said, quoting the founder of the Tata empire.

"He set up the Jamshetji Tata Endowment Trust in 1892, long before John D Rockefeller or Andrew Carnegie," Gopalakrishnan said.

"As Tara says, the image of business is one of violence � it is one of calculation, analysis, profit, greed and a whole host of other unfavorable adjectives," he said, adding that capitalism has always been perceived or associated with ruthlessness, greed and selfishness.

"Periodically, excesses have taken place in all countries and led to public debates," he said.

Gopalakrishnan, whose book The Case of Bonsai Manager: Lessons from Nature on Growing, was published by Penguin India last year, noted that these days there is a great obsession in the world of business with the CEO as the hero. "American business magazines, in particular, specialize in this -- that the CEO is the hero or the chairman is the hero -- he has a square jaw, big blue eyes, he barks out orders at people and the whole organisation performs (thereby) increasing shareholders' value. A mythology has been created around it," he said.

But contrary to what one hears in the world of business, Gopalakrishnan said he has learnt this lesson that the CEO is not the biggest hero. "He is the biggest servant of society and the company, although that is not the way the world sees him," he said.

Noting that CEOs are genetically wired to be self-centered, he said CEOs are also supposed to be overconfident which is not bad at all. But then, there are two kinds of overconfidence like there are two kinds of cholesterol, LDL and HDL, and both of them are not bad.

Like cholesterol when it comes to the overconfidence of CEOs, the bad ones are the ones who have external focus and the good ones are those that have internal focus. "When I am focused on what I have to achieve, and I feel overconfident as to what is turning around my company, that is a case of good form of cholesterol. But when I am focused on getting my story into the media, impressing my shareholders, ensuring that there is no successor, I have a bad kind of cholesterol," he said amid laughter.

Citing the example of Arjun of the epic Mahabharata, who he described as a modern-day turnaround CEO, he said even though like a good CEO he was always in charge of the situation, his strategy to rescue Yadav women from Dwarka did not work and despite his power and might he could not succeed.

"This happens to modern-day CEOs. They are successful in one company, but not in the next company they join," he said.

"So, the first thing the modern day CEO has to learn is how to avoid the natural propensity to fan his ego. He has to realize that he is the servant of society. If he cannot first be the servant of society, how can be become the servant of the company he is serving?" he said.

"I joined the Tatas nine years ago and I have found something unusual in the company. Out of the $3 billion we make after tax a year, $1 billion goes to the Tata trusts in the form of dividend, capital appreciation, etc. So, one third of our profits are really owned by the trusts. It has now formed into a structure that nobody can change," he said.

"In a sense, in my view it compels a CEO to be a servant of the society. You will never find a Tata name among a list of India's richest. I am not dismissive, derisive about people whose names are there -- do not get me wrong -- but in a sense getting your name to the list fans that bad cholesterol that I just talked about," Gopalakrishnan said.

He said the first lesson that he has learnt in his four-decade-long career in business is that contrary to what they teach in business schools and what the business magazines say, business has to be a servant of the society in which it operates.

Noting that joint stock companies have been the single-biggest instrument of economic progress in the last 100 years, he said that he firmly believed the same would be the case in the next 100 years as well.

"And not just in one country, but all over world managements and businesses and capitalist societies must come to terms in some structural way as to what is the real purpose of their existence. And when they do that I think we will have more marvelous marriage or marvelous union of capitalism which is benevolent and for the good of the society," Gopalakrishnan said in his closing remarks.