8 minute read
StAkEhOLdER gOVERnAncE
DR. M. MUNEER
Shouldn’t companies manage stakeholder interests?
Most enterprises run on the fundamental principle of maximizing shareholder value. The exploitative capitalism is ever pervasive even in a pandemic setback. Questions have been raised now in the wake of vaccine-resistant, mutative COVID-19 whether it has become a panacea for over-exploitation – of labor, environment, the poor, women, lower castes, etc. It seems not many businesses are in a hurry to prove Ayn Rand wrong. (She had stated that the soul of capitalism was dead).
Add to that the everincreasing corruption at every level (from containment zone management to vaccine tourism) and the growing poverty (80 crore Indians were identified for free ration by the Prime Minister himself). Without the welfare of stakeholders (employees, customers, suppliers, communities, and society at large), businesses will soon find a bottom and pushback. The concept of maximizing “shared” value is finding currency in many developed economies ever since the 2008 financial meltdown and several billionaires across the world are showing commitment to it. Not much of that is visible in India though.
Take for instance how one of the biggest shareholder wealth creators in India made a big show of donating Rs 500 Cr to the PM CARES Fund only to announce within the week unilat-
eral wage cuts citing lack of funds. Clearly, it was a show for PR and a probable quidpro-quo from government/ policymakers. How could a board approve donations when the enterprise didn’t have the resources to pay salaries to their own employees who toil long hours and suffer stress-related chronic illnesses? Where is the governance these directors are supposed to do?
Perhaps this reluctance to share the wealth with stakeholders prompted the Indian government to statutorily mandate a social responsibility tax on corporates. India seems to be the first and only country in the world to do so which raises the question of why Indians have a tight fist. Currently, over 60 percent of our population is considered to be below the poverty line, receiving free food supplies, while the rich increased their wealth by as much as 35 percent, which happens to be much higher than the 23 percent crash in India’s GDP.
As with most regulatory and legal things in India, the problem with the CSR rule is that enforcement has never been a strong virtue. No statutory audit of CSR spends is done and so most companies and their promoters find ways to divert these funds back to their own pockets by way of setting up own trusts and foundations. Surprisingly, the government has allowed this to flourish. The number of companies having their own trusts and foundations has gone up ever since the CSR rules came into effect in 2014 and is growing every year. This is drying up the funding for genuine non-profit organizations that do dedicated lastmile fulfillment.
Prior to 2014, how many Indian companies had in-house foundations for social outreach? How come companies found a sudden passion for social responsibility post-2014? Why are many of them doing their own social work now even though it’s not their core competency? Are they expecting to add better value or lower costs of implementation by doing the CSR work themselves? If they cannot do either, why wouldn’t they outsource this to NGOs, in a similar way they would do with their business processes? The government should ban CSR spending by in-house trusts with retrospective effect to ensure that social impact is sacrosanct for CSR.
The Economic Times had reported sometime back how middlemen operate for a handsome commission to take out the CSR funds transferred to an in-house trust as cash and manage the eventual payback to the promoters. No wonder why so little development is visible on the ground despite claims of thousands of crores supposedly spent under CSR.
The misplaced wisdom of maximizing shareholder wealth is also evident in another area: Share buybacks. In 2019, over 60 Indian companies bought back shares, but in a crisis like what we face today, if they don’t have cash reserves to support employees, layoffs and pay cuts are likely. It will be interesting to see how
2020 has made the call for stakeholder governance shriller.
Companies are forcing employees to sacrifice by asking them to work remotely from homes that aren’t designed for it and to accept pay cuts performed on these pledges turned out to be a mixed If the CEOs signing the stakeholder statement bag. The biggest stumbling were serious, why hadn’t many of these companies block was timing. In the their boards joined in with actually increased wealth late summer of 2019, no one endorsements and targetted for shareholders once the anticipated that the next calls for action? Why didn’t current financial year closes. year would bring a crippling they insist on specifics?
Shouldn’t the board of global pandemic, a crashing 2020 has made the call directors be cognizant of all economy, riots in American for stakeholder governthese issues and be made cities, and the current level ance shriller. Companies responsible and accountable? of world political brinks- are forcing employees to
A year ago, several US manship. When corporations sacrifice by asking them to corporate heavyweights face sudden shutdowns, cash work remotely from homes vowed to stakeholder capi- drains, and massive uncer- that aren’t designed for it talism and address the inter- tainty, social responsibility and to accept pay cuts. All ests of employees, commu- becomes the first casualty. of these are more realisnities, the larger public, The original plan was tic with employees treated etc as opposed to the tradi- that they would adopt the more like stakeholders. tional narrow focus on somewhat-vague goals to Suppliers and customers shareholders. Some 180 suit their business strate- are in real danger of failure marquee companies includ- gies. Yet, none had published and need help. Let’s hope ing Amazon, BankAm, Ford, their own “here’s how we that businesses will share and Walmart committed to plan to do it” stakeholder the responsibility for the pare their CEO/median pay empowerment details. A ill-health of society and the ratios, aim for a longer-term journey without roadmaps economy. shared-value focus, and build tends to never leave the the interests of suppliers, driveway just as a journey employees, and the environ- without a destination will ment into their governance. always let you claim wher-
One year later, a review ever you reach as the destiof how well they have nation. Sounds familiar?
(With inputs from Ralph Ward) MunEEr is co-founder of the nonprofit Medici Institute and a stakeholder in the Silicon-Valley based deep-tech enterprise Rezonent Corp. Twitter @MuneerMuh
SANDEEP NATH
2020: The year the mask was removed
2020 saw us all wearing masks, but it also gave us the opportunity to unmask the insecurities and blind spots in how we go about our lives, and do something about them
Yes… yes, that WAS the year you started wearing the mask.
But humanity? In 2020 our species finally, courageously, ceased to conceal and deny our insecurities.
Finally, in 2020 humanity began to admit that stress exists. That mental health issues are real. That medicine has limitations. That offices and expensive real estate are avoidable. That schooling systems can be re-examined. That most of what we have grown to accept as ‘the way it is done’ can be changed. 2020 signaled the renewal of entrepreneurship. Of family and caring. Of introspection and mindfulness (even if only about masks and sanitizers, to begin with). Of changing the man-made systems that have stopped serving us. 2020 demonstrated the power our individual will has on stopping the destruction of the planet. On saving the environment and the ecological balance. We have seen the blue skies and free dolphins and deer. But we have only just about scratched the surface of the reality.
Within our species, there is strife. ‘’Black Lives Matter’’ unmasked one such conflict as millions stepped forward to call out division and injustice. But what about the lives of those humans who practically stand at the bottom of the human socio-economic chain, who underpinned our survival last year? The delivery persons, the garbage collectors, sewage inspectors, firefighters, and the medical support staff, to name a few? What have we done beyond sporadic lip service in praise of their courage?
How long will we continue to don the social mask and deny that we win the war because of these nails, which fasten the shoes to the horses we ride?
Can 2021 further unmask the pivotal role of these brave men and women?
Can we at least meet them midway and start becoming more participative and selfsufficient?
Can we, for example, greet the delivery persons at our gates instead of expecting them to wait at our doors?
Can we separate our organic and non-organic garbage and wash away stuck food from the foil trays before throwing them into the bags for non-organic trash?
Can we reduce the incidences of fire by living more mindfully?
Can we learn to self-regulate our health and lifestyle, so we do not weigh the medical system down with avoidable conditions?
Can we start to resolve to be more appreciative, more helpful, more grateful all around?
If we can take this step towards our common humanity, we will unveil the power of individual consumer choice on reshaping global economies and political structures.
We will stop being masked behind outward-facing gadgets, tools, and social conditioning and start developing a more robust human connection. We will begin mending our oneness with nature and bring ourselves to become a part of it, the way we were designed. We will stop thinking of progress as our ability to replace ourselves and instead think of it as our ability to restore pristine natural balance.
Let the unmasking continue.
SanDEEP naTH is a certified Mindfulness Coach, Reiki Master and Qigong Guide.
