Feature

Trusteeship, Gandhi, and Business in the 21st Century

by Namrata Rana on Thursday, October 28, 2010 in Features

I have been watching the debate around “the case against CSR” with interest. The fundamental point where we all seem to get stuck is around “the role of business.” Economists and many CEOs argue that the role of business is to maximise shareholder profits, whereas the CSR community talks about contribution to society for the greater good.

I believe that the essential problem about the role of business cannot be resolved within our current framework of thinking unless we add another element – “The element of Trusteeship.”

The TATA group of companies is based around this principle. Trusteeship is the model of responsibility that best describes the group founder – JRD Tata’s view of himself and his role in the world. It was a view that JRD essentially derived from Gandhi. Gandhi talked frequently about the role of business as being that of a trustee or a steward for what you hold. Gandhi’s view of trusteeship was based on the belief that we do not really ‘own’ our wealth but are only trustees of  it, meaning that we have to administer our wealth for the benefit and betterment of the community. In the trusteeship model, wealth does not automatically go to the family members but only to those who can function as its trustees. Thus, this idea of trusteeship challenged the fundamental principles of a capitalist society. JRD adopted this framework and implemented it in a practical way within the TATA ethos. (Dr. Sarukkai)

Some of the key tenets of trusteeship that I believe are applicable today are:

  1. Surplus Wealth needs to be kept in trust for the common good and the welfare of others.
  2. To fully adapt the concept of trusteeship a non violent approach needs to be adopted.
  3. Everything that we do must be economically viable as well as ethical at the same time making sure that we build sustainable livelihoods for all.
  4. Economic equality through trusteeship will thus ensure an equitable distribution of wealth amongst all.
  5. Absolute trusteeship is unattainable – but if people behave as trustees then we can develop institutions that are economically viable, yet benign.

Not many rued the demise of this concept in the 50s and 60s and this view had more or less been shelved for the latter half of the 20th century. However, this concept is making a steady comeback as economic collapse, absence of values and challenges of sustainable growth face the world today.

While there are many aspects to trusteeship in its ideal Gandhian form, the fundamental concept of trusteeship is about equity and sustainable growth. When viewed from this lens, a Trusteeship approach puts emphasis on reconfiguring social and business structures so that people feel both individually empowered and inclined to act in the common interest. (Ref  – India of my dreams – Gandhi)

My view is that if CSR departments and organizations could be designed around this unique principle of Trusteeship, most of the debate around the role of business would get resolved.

In the debate around CSR, Professor Karnani and others argue that CSR implies a deviation from the core objectives of a business. This is valid from the perspective that businesses have largely seen themselves as distinct from society and as hubs of production and distribution.

However, the world around us is seeing some fundamental changes and senior executives in most companies are aware of these.

According to the UN Global Compact CEO study, 93% of the CEOs believe that sustainability will be a key issue in defining the future of their business. Many of them are rightfully concerned because a shortage of key natural resources is looming on the horizon. In addition, the move from a constantly upwards moving graph that typified the 20th century company is now changing towards a circular structure involving cradle to cradle(zero waste) production.

The same UN Global Compact report goes on to say that many CEOs believe that businesses will now have to move beyond profit as a measure of value, to metrics that take non-financial aspects into account – putting a new onus on the ability to measure progress.

If we examine the role of business in this context and apply the principles of Trusteeship to today’s corporations we can devise a new way of integrating social responsibility within the DNA of the business. This will ensure that our companies no longer need to set up CSR departments to showcase our efforts, instead CSR will be built into everything we do.

The Gandhian perspective is more relevant today than it was ever before. Gandhi wanted to ensure distributive justice by ensuring that business acts as a trustee to its many stakeholders and specified that economic activities cannot be separated from other activities. Economics is part of the way of life which is related to collective values.

Gandhi said, “True economics stands for social justice, it promotes the good of all equally including the weakest and is indispensable for a decent life.” This has implications at the macro economic level as well as at the micro level, as it talks of equitable distribution of wealth being a measure of success, rather than the current form which has high income disparities. It also builds the case for CSR being embedded within the business values of the private sector as Gandhi clearly states that distribution of wealth is not about charity but about ensuring basic human dignity.

Inherent in this philosophy are entrenched solutions to many of the challenges of the 21st century:

  1. Sustainable consumption – consume what is enough for your needs without doing harm to others.
  2. Utilization of natural resources in a sustainable way – you are a trustee and you need to take care of what has been freely provided by nature.
  3. Dignity of labour and equitable distribution of wealth – wealth alone is not the answer, to feel happy you need to ensure that the people who work for you and society at large is taken care of.
  4. Sustainable livelihoods – and not charity – are a key to ensuring human dignity, growth and satisfaction.

So today, while we all agree with the concept of improving stakeholder value, let’s redefine value to incorporate much more than profit. It is in this context that the 21st century corporation should see itself.