The Conscience of Capitalism
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Image: Sean Gardner/ Reuters
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Woes Continue The BP oil spill in the Gulf of Mexico
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When a citizen does wrong, you know whose ass to kick. When a corporation causes harm, who exactly should take the rap? Moreover, unlike a person, as Nace points out, a corporation can do the Houdini — disappear and reappear in another body with a new name — and avoid being punished.
Such are the questions that President Obama and the American people, and also the Indian government and Indian people, are grappling with. Whenever the leaders of the US and India come together, as they will again when President Obama visits India later this year, they proclaim the partnership between the two largest democracies in the world. Along side such visits, business leaders from both countries also meet to promote investments and trade.
Should not these dialogues between government and industry leaders also be about the evolution of better institutions of democracy, and capitalism, and within that, the role of corporations? Because, as leaders of the largest democracies, they must also show leadership in the evolution of ideas and institutions.
Mankind has developed many powerful ‘dual use’ technologies that can do great good but, in the wrong hands, can do great harm too. These include nuclear energy and bio-genetics. Who can be trusted with their power? What safeguards must be in place? The large, limited liability corporation is also a powerful ‘dual use’ concept invented by man. The agenda for co-operation between the US and India is fraught with debates about these ‘dual use’ technologies.
Business needs freedom to take risks, innovate and increase wealth. Governments must protect their citizens and promote the common cause. Therefore, even as governments promote business, they must also regulate it. Business leaders resent regulation. They would rather be trusted to regulate their own behaviour. They must always remember that corporations are given a licence to operate by society, and that society can curb or even withdraw that license. The most egregious illustration of this is the conduct of the East India Company. It was given a charter by the Crown to trade in the East. The minutes of its board meetings in London show that the board was hardly concerned about the conditions of the people in the places in which the company operated. It was concerned about financing the missions; it charged its operators abroad to make profits; and it decided the dividends for the investors. When the conduct of the Company’s operators became intolerable, the people rebelled, and the Crown was compelled to withdraw the Company’s charter.
Self regulation requires a conscience. Corporations are the engines of capitalism. Wherein lies the conscience of the corporation — an inanimate, legal construct devised by man? That is the question at the heart of corporate governance. Does it lie in the board, which society should trust to ensure that the corporation causes no harm? If so, is the board equipped with the moral precepts, intellectual ideas and norms of conduct that will enable it to discharge its responsibility to society? The responsibility of the chairman of the board is to ensure that the board is so equipped. A capable board with a conscience can ensure that the corporation’s executive management is well equipped to act responsibly too.
Finally, as the woman from Nigeria said in Sweden, the people want the buck to stop somewhere. They are tired of buck-passing. Great leaders admit the buck stops with them.
(by Arun Maira The author is a member of the Planning Commission)
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This not being the case in point of BP currently which was just so unprepared to take on the mess. It was more in a shock and looking after the media as opposed to the issue at hand.
UNION CARBIDE on the other hand dealt with the issue as any MNC would have done when dealing with a banana REPUBLIC. Take on the media via the govt and hush things up. If arms have to be twisted go to Uncle SAM and ask him to put a price on the situation and deal with things. TRAGEDY is this time KARMA has dealt the Americans a blow on their funny bone, it hurts, makes them look inept when cleaning there own backyard.
