Carving the Path to Acceptable Capitalism
BY RAVI CHAUDHRY, ACADEMY FELLOW
It is widely acknowledged that capitalism, as it has evolved over the last five decades, is no longer acceptable. Many of today’s global problems are directly attributable to blatant excesses of capitalism – including the glaring collapse of governance, which is virtually subservient to priorities of capitalists in most democracies and autocracies. Politicians and capitalists are like the two sides of the same coin; heads or tails, they are the uncontested beneficiaries of most policy frameworks, often with irreversibly adverse impact on a multitude of global communities. Yet they genuinely believe that their perch at the top of global wealth and power indices is their legitimate entitlement and that they are neither responsible nor accountable for any collateral damages.
This, in brief, explains why jamborees at places like Davos fail to deliver meaningful results. The powerful and the mighty love these carnivals for the unrivalled opportunities to network with policy-makers and like-minded colleagues on how best to extend the status quo, while creating philosophic hype about changes the world needs in the next decade or two. There are four types of dialogues in such gatherings.
One: Issues where corporations are neither a part of the problem nor a part of the solution. They are more an anvil rather than the hammer, for example, the war in Ukraine and other geopolitical wrangles. A lot of time is spent on such concerns – to articulate holistic assertions on the evils of war and the safety and livelihoods of innocent people.
Two: Issues where corporations and governments are not the problem-creators, but together they are the only solution-creators, for example, the COVID epidemic. Since a delay in finding solutions would impose heavy burdens on both, there is an exceptional level of collaboration, not often seen on other equally pressing issues.
Three: Issues where corporations and governments are a major part of the problem and also a major part of the solution. On these consequential matters such as climate change, biodiversity, water conservation, and soil restoration – everyone acts like a global redeemer and announces grandiose plans, endeavoring to outdo all competitors. Typically, the commitments pertain to results to be evaluated a decade or two later – long after the pledge-makers will be out of office. I have come across very few corporations specifically announcing what they will do in the next year or two.
Four: The many issues where corporations have created the problems and they alone can implement solutions. These issues are entirely within the CEOs’ and Boards’ ambits, yet they seldom comprise the core agenda. They are invariably sidelined for discussion at parallel civil society forums. Meanwhile, corporations continue to monetize the pro-business, anti-citizen, and anti-environment framework of laws and regulations on matters of substance, such as: reducing steep salary differentials, shunning tax havens, endorsing equitable tax rates, assuring human rights of women and minorities, removing disparities among diverse groups, spurning corporate lobbying to seek political favors, and aligning corporate purpose with corporate action, to name a few.
Instead of changing the course, corporate leaders often tend to defiantly stretch legal and policy loopholes to test how far they can get away with irregularities. They feel secure in the knowledge that none of them will be personally liable for misdemeanors; at worst a fine may be imposed on the company.
Ernst & Young, a global auditing and consulting firm, was slapped with a $100 million fine by the US government after it was discovered that a “significant number” of their auditors cheated on the ethics portion of the Certified Public Accountant test, needed to maintain their licenses. The company knew that its auditors had been cheating for several years and did nothing to stop it. Glencore, a Swiss commodity trading and mining firm, pleaded guilty and paid $1.1 billion to resolve investigations into violations of the Foreign Corrupt Practices Act (FCPA). McKinsey & Company, consultant to corporations and governments, agreed to pay nearly $600 million to settle investigations, after it was established that the company drove sales of Purdue Pharma’s OxyContin painkiller amid an opioid crisis that contributed to the death of more than 450,000 people over two decades. Novartis Pharmaceuticals paid over $642 million to settle allegations of improper payments to patients and physicians.
There are hundreds of such instances, but hardly any action is ever taken by regulators or companies against those individuals who threw common ethics to the wind. Now that Milton Friedman’s doctrine is long dead and the legacy of Jack Welch is being openly decried, it is appalling that so few voices condemn the increasing prevalence of this ‘unculture’ of despicable practices and conscious disregard for ethics and moral principles.
The heartening news is that over the last two years of relentless agony caused by the pandemic, war, inflation, and climate change, we have seen a resolute resurgence of multiple change-makers, led by a large segment of 2.43 billion millennials (born between 1981-1996) and 2.47 billion Generation Z (born between 1997-2012). They are no longer willing to accept flagrant injustices as a part of their destiny, and they are receiving unprecedented support from employees, customers, and many outstanding business leaders—both former and current CEOs in all parts of the world—determined to alter the status quo, to bring about greater equity and sustainability. They are emerging as the forerunners of transforming how business will be done hereafter. Even the enlightened media is beginning to support them.
It is time for every corporate CEO and every corporate Board to be cognizant of the rapidly disappearing tolerance for corporate transgressions. There is an unambiguous insistence from every section of society that the period for cosmetic exercises and public relations to create a positive image is over; it is now time to alter the reality.
The option to proceed with incremental changes is long past expiry date. Corporations, big and small, must go all-out for a decisive shift to a new era of corporate leadership, where CEOs and Boards pursue a proactive path to align corporate goals with societal expectations, and consciously transition from “leadership” to “responsible leadership” and from “entrepreneurship” to “responsible entrepreneurship”.
It is my firm belief that only a corporation that accepts the non-negotiable ethos of profits with conscience, growth with equity, and compatibility with nature, can become a global leader in its business domain. This is the only way to carve a path to what I call “Acceptable Capitalism”.
About Ravi Chaudhry
Ravi Chaudhry, a former chairman of Tata Group companies, is an author, speaker, and change-maker, with singular focus to foster a new edifice of responsible leadership and responsible entrepreneurship in business and society.
His book, Quest for Exceptional Leadership: Mirage to Reality (Sage: 2011-1st Edition, 2016 – 2nd Edition) has been globally acclaimed as “a contemporary masterpiece, a rare combination of sound business thinking and accessible philosophy, and the best book on leadership in years”.He regularly leads Leadership Workshops and Board Retreats; his most popular global program, Shape your Future before it Shapes You, is designed to empower the leadership teams to break out of the gravitational pull of the past prejudices, and discover the dormant strengths within oneself to be a better person and a better leader. Founder Chairman of Cenext Consulting Group, he is a Fellow of World Business Academy, and Co-Chair, EthicMark Judges Panel USA. Referred to as a leadership guru, he is also a Fellow of Salzburg Global Seminar, and a steward of the Council for Inclusive Capitalism.
For more information on Ravi, see his Fellow’s profile here.