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The Daily Sabbatical/Ivey Business School | Apr 2, 2012 | 5432 views

Occupy, Economic Inequality and Business Initiatives: Insights from India

Occupy movements highlighting economic inequality have quickly spread around the world. But they have also excluded several countries. One interesting example of the latter is India. How have businesses in India coped with the dual pressures of enhancing shareholder wealth leading to economic growth and operating in a society with a high level of inequality? Can businesses in the developed world learn from Indian enterprises that have attempted to balance their respective corporate good with the

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ith a theme of 99 percent vs. one percent, Occupy Wall Street (OWS) targeted the richest one percent of people in the United States who were perceived as [unfair] beneficiaries of a system of capitalism that was forestalling the future of the vast majority. Among the one percent are major businesses, which are increasingly being targeted by OWS. For example, Occupy protesters have called for the shutting down of ports operated by SSA Marine, a transportation services company owned by Goldman Sachs, the U.S. bank that was at the centre of the global financial crisis in 2007-08. The Occupy movement has since spread to over 100 cities in the U.S. and it has found an echo in over 1,500 cities globally, including parts of Europe.

Since April 2011, India has been witness to the rise a popular movement called “India against Corruption.”  Led by Anna Hazare, a homegrown social activist, the national uprising is aimed principally at the top echelons of politics (known to demand payment from businesses for major licenses and other deals) and the lower echelons of bureaucracy (known to demand payment from ordinary citizens for simply providing basic government services). Together they symbolize all that is ugly in the country’s socio-economic system.

Wealth inequality in India, per se, is similar to wealth inequality in the U.S. and Canada. Gini coefficients for household wealth for the U.S., Canada, and India are 0.801, 0.688 and 0.669, respectively. {The Gini household wealth coefficient ranges from 0, which indicates complete equality (every household in society has the same wealth) to 1, which represents complete inequality (one household has all wealth, whereas rest have none)}. Higher values of the Gini, therefore, signify more inequality. It should be noted that the numerical difference in Gini values between countries might appear to be smaller. But even small differences can signify large differences in their ranking on inequality indices. For example, with a value of 0.801, the U.S. ranks at 146, while Canada ranks at 59 out of 150 countries. Despite high wealth inequality, an Occupy-type movement of the kind that pits the ultra-rich against the not so rich has not gained traction in India. Nor is it, one can safely say, likely.

The reason is that Indian businesses have a long history of operating in an environment where inequality was rampant. For decades after independence, India purportedly pursued a socialist model of economic growth, commonly known as the license raj, in which the conduct of business was regulated by both federal and provincial governments. Business enterprises had to deal with a political climate that was anti-business, made even more difficult by endemic corruption in political institutions and the bureaucracy. It was only after 1991, with the launch of economic reforms, that India witnessed a pace of economic growth that remains unmatched by even the developed world today. But old ghosts continue to haunt, and the mindset of the license raj continues to prevail. A recent example is the manner in which foreign direct investment in multi-brand retail is being stalled by the Indian parliament. The issue has become a political ball game, without a proper evaluation of the pros and cons for business and other stakeholders in society.

Given this political climate, how have businesses in India coped with the dual pressures of contributing to economic growth and operating in a society with high inequality? The short answer is quite well, and there are valuable lessons that businesses in the developed world can learn from Indian businesses that have managed this contradiction. As this article will describe, there are lessons that can lead to new business opportunities and enable the firm to contribute to society.

 
Managing growth, reducing inequality
Some large Indian companies have found a way to conduct their business profitably while making investments aimed at providing greater opportunities for the underprivileged. Their approach can be examined under four categories: (i) community development, (ii) education, (iii) partnerships, and (iv) developing low-cost products.

 
Community development
Community development has been one of the key drivers for the success of several large corporations in India. They regard it as a way of giving back to the community that has sustained them. In turn, it has improved their relations with the community and enhanced their reputation.

•   Wipro Cares is an initiative launched by Wipro Ltd., a global software company based in Bangalore, to improve the lives of marginalized communities in the neighborhoods of cities where its offices are located in India. The venture is funded by donations from company employees that are matched by Wipro, creating a culture of community development across the entire company. It is focused on three specific objectives: offering healthcare to under-privileged families living close by; providing rehabilitation to survivors of natural calamities in different parts of India; and enhancing the learning abilities of children from poor families in its neighborhoods. The initiative coordinates voluntary employee efforts in nation-wide projects in each area of focus.

Wipro Cares has set up health clinics in each of the 25 villages located around three of the company’s manufacturing plants. They cater to the medical requirements of about 25,000 outpatients annually. It has adopted Pushpavanam, a village in the tsunami-ravaged belt of the state of Tamil Nadu, part of its attempt to rebuild the village and restore the lives of its inhabitants. Wipro Cares has also been involved in community efforts like restoring a lake in the city of Hyderabad, building a drainage system in parts of the city of Bangalore and engaging in forestation activities near the city of Chennai. Wipro Cares volunteers – who include not only employees but also their families and friends – have constructed toilet blocks at schools in Bangalore. This step follows in the wake of research that has shown that lack of toilets facilities in schools is the main reason for the high levels of dropout rates among girl students.

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