21 August 2017 Business Honest Corp

Ideals Know No Boundary

Any business has a direct effect on the social condition. In a society such as ours, where the divide between the rich and the poor is gigantic, it becomes the ­responsibility of ­entrepreneurs to act ethically and give back in some way.
Ideals Know No Boundary
Illustration by Sajith Kumar
Ideals Know No Boundary
outlookindia.com
2017-08-11T15:16:40+0530

There’s a very simple question that lies at the heart of every decision that a business will have to take. If that were the talisman that one always wore, we’ll be adding tremendous value to the lives of people and, quite naturally, enhancing the country’s economic prosperity. By extension, we will, as a business, also grow in fin­ance and in people’s estimation. The question is merely this: Would my action enhance respect for my company and for me in the society? This is, I believe, at the heart of the idealism of capitalism. At this stage in the history of India when capitalism is new, when we see a lot of poverty around us, when 700 to 800 million Indians live with hardly two meals a day, it is incumbent on every leader of capitalism to demonstrate that idealism. I believe that entrepreneurship is the only instrument in our hands to create jobs and put income into the hands of people and make them economically viable.

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Many of us may recollect a time when ent­repreneurship and business people were not looked upon in India in the same positive way as they are now. By and large, you could say businessmen have been decent people. Even in the past, like it is today, it was always a small percentage of businessmen who created a bad name for businesses by their action. Such people create an environment where being wealthy is frowned upon.  But poverty is not a virtue and Leftism is not the way forward. We have to embrace whatever instrument we have to create more and more jobs with better and better inc­ome. That, whether we like it or not, is possible only through entrepreneurship. And, entrepreneurship will thrive only in an environment of compassionate capitalism—fair, decent, honest actions in creating wealth and jobs.

“Generally, I find that I am a very emotional person. A lot of my decisions are based on ­idealism and probably, I should have listened to them (former colleagues who had advised him to carry on).”
N.R. Narayana Murthy on quitting as Infosys chairman in 2014, in a television interview

Of course, even today, there are firms with lots of governance deficits or with the kind of boards that you may not want. Again, they are the exceptions. In India, we have seen a transformation towards better governance ever since economic reforms in 1991. First, the economic reforms removed a lot of hassles for Indian businessmen and, therefore, the need to grease the palms of politicians and bureaucrats greatly reduced. Second, lots of foreign capital started flowing into India and these were people who’d seen well-governed companies across the world. If Indian companies aim to be world class today, they must realise that not embracing good governance will result in investments not coming, their stock not being traded well, and the market cap not improving. Thirdly, the Indian businessman realised the power of price to earnings (PE) ratio which, till 1991, he hadn’t known as well as he does today. The fact is that if I improve my earnings by just one rupee through better cost control, better management of finance and better processes, then my own wealth will improve by 10 to 20 rupees.

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For quite a few years now, I have not served on the board of any major company in India other than Infosys. So, that’s the only large company board I can speak of. And, I can guarantee you that till October 2014, when the founders voluntarily left the institution, the board of Infosys went deep into every issue. It asked the question: will this decision of ours enhance respect for Infosys, will this decision enhance respect for us, the board members, and will this decision enhance respect for our employees in the eyes of society. We created an environment where every individual was encouraged to discuss and debate issues and come out with their honest opinion, the maxim being ‘you can disagree with me as long as you are not disagreeable.’

Around the time we were starting out in 1981, J.R.D. Tata was a great role model for all of us. I don’t know if there are too many examples in India of a company built by a group of youngsters from middle-class families (total outsiders to the business world) that have run this marathon as long as Infosys has (it’s been 36 years). But I do think that there are several companies in the making. I’d rather not name anybody specifically because I don’t want others to think that I have forgotten them. But I can definitely say that there are several such examples on the horizon of up and coming companies which have embraced the principle that Infosys demonstrated.  

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My view has always been that the people of this generation are smarter than the earlier generation. They have better values and are more adventurous. The very fact that the world has made such tremendous progress is a validation of this belief. The current entrepreneurs are products of a certain set of forces that are determining the equilibrium in the market place. At least I will not criticise them for any of the stance that they may have shown. As a generation, their value system is better than our value system.

To The Top

Narayana Murthy on a ladder

Photograph by Namas Bhojani

As we move forward over the next 100-200 years, I’m sure, you will see an Indian way of doing business taking shape. After all it’s just 70 years since Independence. We were not in control of our destiny for long. Therefore, it is not fair to say that Indians have not achieved as much as the Germans have or the Americans or the Japanese. They’ve all been in business for much longer. So, a culture like ours will take probably long to regain its own self-confidence, and to become as confident as some of the western countries. I may not see it in my life, but I’m sure my great grandchildren will see an India which you and I wish for.

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But here’s where compassionate or idealistic capitalism comes in again. I’ve always believed that a stable, progressive, harmonious and peaceful society is one where the rich, the powerful and the elite demonstrate self-restraint. Japan is a good example. Most of Europe is a good example. Only in the US and in some cases, in India have business leaders taken the ratio of the lowest salary to the highest salary to an unbelievable level. But in most of Europe and in Japan, there’s a certain self-restraint that is working. If people get the feeling that their leaders are accruing to themselves a disproportionate part of the company’s result, there’s going to be anger and dissatisfaction.

J.R.D. Tata

Photograph by Tata Central Archives

It’s the leaders of capitalism who have to pay heed to the worrying signals that are showing up around us a couple of decades after the economic reforms because the poor can suffer only so much. Hunger knows no law. So, if we continue to make the poor people in the society suffer, at some point of time they will say enough is enough. We have to take pre-emptive action because we have the power and we have the money. Already, there are refugees rushing into various European countries. At some stage, millions of poor in India may also simply take over our swanky corporate headquarters, our big cars and our huge mansions. I will not blame them because we are not making efforts to improve the lives of the poor as much as we can. We are stuffing our pockets as if there is no tomorrow.  

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There are certain areas where idealism is absolutely essential. They are in your values which are time-invariant and context-invariant. What are values? Values form a protocol for behaviour among individuals in a community to enhance trust in each other. So, there is nothing like a particular set of values for business, another set of values for social interaction and a third in politics and a fourth at home. The universal values of honesty, integrity, fairness, decency, openness to learn from others, tolerance for other views and practices, hard work, and transparency transcend geographies, religions, castes and even eras.

“At twenty, if you are not an idealist, then you don’t have a heart. And if you continue being an idealist at forty, then you don’t have a brain.” 
Sudha Murthy in her novel, House of Cards

Let me give you an example. In 1995, we, at Infosys, could not continue our contract with a Fortune 10 corporation due to lower prices demanded by the custo­mer. Had we accepted this customer’s terms, we would have to do the same for other customers too, which meant we would not have enough money to invest in training, quality, produc­tivity, technology, better buildings and better salaries. Hence, we took the tough decision to discontinue working with that customer. But, within 48 hours, T.V. Mohandas Pai, Nandan Nilekani and I went to Mumbai to address the analysts. And we told them that we had lost this important customer who contributed 25 percent of our revenue. We also presented our plan to replace that revenue in the next 3 years. The stock price did not go down. It went up.  

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So, if you are honest and level with your investors, they are likely to excuse your mistakes. Investors understand that every business will have ups and downs, but what they want you to do is to be honest with them. If you try to hoodwink your shareholders, you will eventually lose. That is the most important lesson I have learnt in business.

As Told To Ajay Sukumaran


N. R. Narayana Murthy The writer is the co-founder of Infosys

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