Speech delivered by Rahul Bajaj
Prof Ramlal Parikh Memorial Lecture 2008
Government, Business & Society, Ahmedabad November 22, 2008

I am happy that the Indian Society for Community Education, founded by him, is continuing to pursue the task of true education, as the liberator of minds and enabler of greater human capacity for everyone, at all stages of their lives.  

I am pleased to be in Gujarat because it always reminds me of the two great architects of independent India , Gandhiji and Sardar Patel. And of innumerable other men like Prof. Ramlal Parikh and Tribhuvandas Patel of Amul, who were moulded by Gandhiji & the Sardar to build new kinds of institutions.  

I am a businessman but was brought up to view business not merely as a wealth generation activity, important as that is, but as an activity that takes a nation forward and as a social activity. JRD Tata once remarked that his companies needed to make profits to fund the group's philanthropic activities. I understand such a remark & I believe he meant it in all seriousness.  

This concern with broader issues has been a family legacy for me. From the time of my Dadaji Shri Jamnalalji. What I enjoyed, and remember most vividly, were the after dinner conversations with my father, the late Kamalnayanji on all kinds of issues that he dabbled in as a Parliamentarian & businessman. Unfortunately, he died in the prime of his life in 1972 and my learning from him was interrupted.  

However, soon after his passing away, I entered public life via my involvement with business associations, especially the Confederation of Indian Industry, i.e. CII. For almost the last thirty years I have engaged with larger issues of the economy & business. By a quirk of chance, I found myself in the Rajya Sabha in 2006 and have since then had many occasions to listen to and think about, speak about, various issues facing the nation.  

This is the reason I chose the subject of Government, Business and Society for my talk here today.  

It is self evident that the interplay of these three broad categories decides the development of any society. The question arises what should be the balance between these entities in any society? For example, if we compare the US , Europe and India , then we find a very different balance being struck. This is but natural. Each society is a product of its history and the imagination of its people. No two societies are or can be the same.  

This is a very old question. Plato was thinking of it when he wrote “The Republic”. Then the question was of the relationship between the society and the governing structures and how to ensure that the governing structure was good. Even in “Arthshastra” the role of trade and production in ensuring the viability of the State is understood. The “Panchtantra” says that “No King shines with inner light”, alluding to the role of taxes in making a State possible. But, since the last 500 years, the growth of capitalism has increased the power of Business and it has had an increasing role in Society and in the Governments.  

Before we get submerged in the realities of these relationships, let us step back and envisage what our republic should look like? What relationship would we want to have? Then, we can compare what we want with what we have, and chart a path in the direction we wish to move in.  

Let me begin with what kind of a society we want to be. I believe our Constitutional fathers have said it very well. But for uncontrolled reservations and wrongly implemented socialism, in the past, I would be very happy to live in a society our Constitution envisages. Freedom of speech, freedom to pursue one's vocation, a secular country celebrating its diversity, a society mindful of the poverty of a large no. of its people, and trying to support their development, and ensuring that minimum education and health are available to all. Yes, this is the kind of country I would love to live in.  

Where I would differ is that I would want our society to encourage and reward enterprise. We move forward largely by the efforts of the excellent. This excellence should not be exclusive or a privilege of any segment. But we must believe in nourishing excellence. Mediocrity can be tolerated, even supported, but should not be venerated. The strong in our country have been, in our tradition, given the responsibility to protect the weak. Right is stronger than might. This is what Gandhiji proved to us and the whole world.  

Society should articulate its position on major issues confidently. There should be civic sense and laws should be upheld by all in their daily existence.  

Let me come to business.  

Business has to be ethical, in letter and spirit. It has to be innovative. It has to compete globally. It should pay its taxes. It should refrain from abusing its economic power, refrain from encouraging corruption, and refrain from cutting cozy deals with the government at the expense of the citizens. It should provide good quality goods and services to its customers, take responsibility for the long term impact of its products on the environment, ensure good corporate governance and carry out philanthropic activities.  

I now come to the nature and role of government.  

Good Governance is essential. Business and society need provision of public goods like law & order, roads, infrastructure, currency, defence, foreign affairs, to prosper. Also, rules need to be made and enforced. Contracts have to be enforceable. A modicum of legislation and regulation is necessary to define the rules of the game and protection of all the participants in it. The government should be answerable to people and hence democracy is essential. Especially in a developing country, state provision of essentials like health and education is necessary. But, the basic stance has to be enabling and not tying up people's spirit and enterprise in knots. Services should be provided effectively, efficiently, courteously and without the citizen's need to grease palms. Also, the resources required for such provisions should be low. In my view the State should absorb a much lower percentage of the GDP than it does currently.  

Utopic ? Certainly. A society that is cynical and is stuck in a dog eat dog worldview has little future. As the poet William Blake put it, “Great things happen, when men and mountain meet. Not by jostling in the street.”  

In the current uncertain times when Yeats's poem “Second Coming” resonates where “Things fall apart; the centre cannot hold” and “The best lack all conviction, while the worst are full of passionate intensity”; it is the duty of those who can, to conjure a different future.  

The election of Mr Obama is proof that idealism still matters and is more important than race or experience. Our own independence movement was proof enough. In the business sphere, the opening up of our economy since 1991, has given scope for all desirous and capable of achieving, to achieve. Names like Airtel or your very own Reliance, Adani & Nirma, which did not exist till recently, are today powerful enterprises.  

In elucidating the desirable, we can find the gaps between what exists and what should.

In the US , Business is the strongest entity, and the government largely does its bidding or, to put it more politically correctly, responds to its needs. Regulation of business is limited and light, in letter and in spirit. The American dream and the belief in the power and responsibility of the individual are central to the American psyche. Religion too is a powerful force.  

In Europe , while Business is strong, the welfare state is very much in place and trade unions are stronger. Regulatory oversight of business is much stronger than in the US .

In our country, due to both the legacy of colonial rule and the leading role played by the Congress Party in the freedom movement, the State has overarching powers. Corruption and arbitrariness are unfortunately rampant. There are too many laws and too little justice. Business has gained economic strength but lacks credibility with society as a social force. Social mobilization is around caste and the civic spirit is unfortunately weak.  

We have not yet as a society come to a clear view on the relationship between these three forces that shape our economy and society. It is important that we do. The broad theme is that, for a set of reasons, we chose to put the Government at the centre of things and considered Business as a necessary evil. This in my view is more in line with a colonial mindset than of a free country. It has also been responsible in a great measure in constraining our development. I would submit further that it is precisely in parts of the country in which this yoke has been discarded by society, that development has occurred. In parts of Gujarat, Maharashtra , Tamil Nadu for example. To progress we have to rebalance this equation.  

Human civilization has largely been a process of making cooperation possible between larger and larger groups. Society is an amorphous entity. All of us have multiple identities. In our large and diverse country we are an amalgam of societies and not one monolithic society. However, in the ultimate analysis, it is the society that determines what happens. Neither the government nor business nor any other organized group.

The market is necessary for a society to perform the essential function of exchange possible. Societies permit markets to grow, and regulate them. In that sense markets are embedded in societal choices. If we recollect history, the British royalty permitted the East India Company to trade, as did the Mughal Emperors. We know that between Europe and America there are fundamental differences in the socially acceptable roles of business and government. These as we know can change, as the recent virtual nationalization of the financial sector in America shows. We, I believe, have to arrive at an Indian conception, given our situation, our history and our cultural ethos.  

To rebalance the equation, both civil society and business have to take the lead. Being a businessman, I would focus in my talk today on the things the business community needs to do to improve its credibility in our society.  

Business exists to fulfill the needs of the customer. In the process it creates wealth and employment, pays taxes, rewards its shareholders. If business is to continue to exist, it has to continually reinvent itself & grow.  

India has a very long tradition of business. We were trading over 2,000 years ago. We were manufacturing cloth & many other things and trading with East Asia, Eurasia and Africa . The hundi was invented by us long ago to settle long distance accounts. In our society, governments were advised to tax lightly, generally around 25%. In our country the strong are expected to protect the weak. The fortunate to aid the unfortunate. Schools & places of higher learning & dharamshalas & even health care, were built by the rich. In our temple at my home town Wardha, which celebrated its centenary this year, at the gateway sat an Ayurveda practitioner hired by the temple to provide free medical care. The same temple was also the first temple in the country to be opened to Dalits in 1927.  

Gurudev Tagore, writing a century ago in his essays on “Greater India ”, put forth the idea that we have survived so long as a civilization precisely because the government's role in our country was restricted traditionally. It was the Community which created and managed basic requirements like irrigation, education and so on.  

Unfortunately, after Independence , with the emphasis on the Public Sector and the establishment of a license-permit raj, the Indian private sector was again at the periphery. The mood of the establishment was anti-business. Also, because of distortions introduced by the government, a large section of Indian business became unsavory in its dealings and did not endear itself to the public at large. Shortages bred short changing on quality, black markets, etc.  

It is a trifle ironic that at a meeting in Wardha in March 1948, after Gandhiji's assassination, Nehruji expressed himself clearly that whatever the government got involved in withered. And yet, he pursued the idea of big government and the public sector.  

At independence, stock markets were under developed and the Indian entrepreneurial ability to raise large funds was limited. Hence, the Public Sector and some degree of government controls on industry, especially given the real constraint of foreign exchange availability, were necessary. However, this was persisted with for far too long and created major distortions in our markets and our thinking. Even 17 years after major economic reforms were undertaken in 1991, vestiges of this thinking are still evident in our government.  

There has been a sea change in public perceptions in the last two decades. Making money has become a global obsession. When even Deng Tsiao Peng says that to be rich is glorious then it can not be that bad! However, how one makes one's money is important. Money should not confer legitimacy to crooks. Also, there are values much more important than money. To me the soldier, the teacher, the doctor, for example, have a higher calling than businessmen. At the same time, the Political class and perhaps the bureaucracy, have lost their sheen. Many of them are considered corrupt and ineffective by default. Therefore, businessmen are becoming the new role models.

Even so, the credibility of business the world over is not too high. Enron, Worldcom in the US shook public confidence. The recent sub-prime crisis in the US too has reflected both incompetence and irresponsibility of very reputed companies and the Government. CEOs of banks have bailed out in golden parachutes. The uproar of CEO pay continues to rise. We have enough cases of investors being duped in IPOs.

Business has to understand that it can operate only if it has public legitimacy. The economy is embedded in a society. We realize this clearly when things we take for granted do not exist. Some states in our country do not attract major investments because of business perception of their law & order. This is the reason for their remaining backward. What business can be done in Zimbabwe today?  

I believe it is our responsibility to make the process of reform and liberalization develop a large and growing constituency in the country. This is neither the job of the government alone, nor in its capacity to do so.  

With rising inequalities in our country and rising cost of housing, education and health, there is a real danger of liberalization getting a bad name and our sliding back into tokenism. Corporate India also has a huge stake in this process. We have to proactively create situations wherein more and more people have a stake in the system and in the economic system being fair, sensible and sustainable.  

For achieving this I believe the corporate sector needs to ensure four things:

1. Provision of good quality products and services

•  Good Corporate Governance

•  Corporate Social Responsibility and

•  Philanthropy  

The first 3 are necessary ,in fact, essential. The last named is optional, though much of the positive public perception is quite often based on philanthropy. The Tatas have been institution builders and philanthropists par excellence.  

I am mentioning the first because all others are futile if this basic contract between business and the customer is not kept.  

Good Corporate Governance is a matter of observing, in letter and spirit, a regime of disclosure, transparency and accountability. It is a mandatory responsibility one accepts when one manages a publicly held company.  

Corporate Social Responsibility, CSR, is what one does upstream and downstream to be socially responsible and also to enhance one's business interests. For Bajaj Auto to manufacture environment friendly vehicles, in an environmentally responsible manner would be CSR. To train people to drive safely would be CSR. To assist educational institutions in our area would be CSR. CSR in my view is done in enlightened self-interest and also helps the society.  

Philanthropy is the simple giving back to society in which we function and from which we get so much. I believe ploughing back at least 1% of our net profit into philanthropy is the least we can do. Even if this much is done a lot would change. Anything done with private initiative, delivers many fold the value that would be generated by governmental spending.  

There can be a discussion of this four point categorisation, its refinement, but I believe it is important to keep things simple.  

In our country, we have a tendency to make structural changes, unmindful whether processes support or undermine that structure. We have democracy and poor governance, a bureaucracy and rampant corruption. In such a system scoundrels can get away scot free and the straight forward can find themselves tied up in red tape or worse.  

Therefore, I believe we should minimize regulation, important as it is, and have it largely for laying out the broad principles of the rules of the game and for cases when gross travesty of justice occurs. For the rest, the market is more likely to achieve the desired objectives than regulation.  

I come to the question of how do we run organizations such that the four things I have just outlined; good product, corporate governance, CSR and philanthropy, happen in them, in this greed centered world?  

I believe it is the culture of the organization that can ensure it.  

Again & again it comes back to what is one's conception of people. What drives them, what motivates them, what gives them satisfaction.  

I continue to believe that beyond a minimum, people prefer meaning to meaninglessness, prefer contributing to build something, prefer camaraderie to hostility. I believe that the lovely Greek word “oikodomein” or to “build up a house”, is a basic human urge. People leading organizations, have to create an environment conducive for their colleagues to have this sense of contribution. This comes from having an ethical organization and by being governed by good values, where integrity, quality, dignity and a sense of fair play exists. From such an environment comes pride and satisfaction in one's work.  

I have found that if one keeps the nation, the organization and the individual hierarchy, in this order, in decision making in a company, then things become relatively simple. This means that a national priority should take precedence over a company priority, which should take precedence over an individual priority. If this is done consistently, it moulds our behavior. I should add that the top management of a company has to be specially disciplined, because it is there where individual priority has the latitude to over ride organizational or national priorities.  

Business is knowledge based. This today requires much greater engagement and involvement of our employees. To survive, let alone prosper, in today's competitive environment, a company needs outstanding people. In this race to attract and retain talent, the reputation of an organization matters. Its results, culture and its CSR image. This is another factor which drives us to be good corporate citizens.  

We are not and do not need to be saints. In this world very few, who are in a position of authority, are. We have only to understand our enlightened self-interest and pursue it. We have to be also aware of our essential mortality and humanity.  

Reforming the government is a much more difficult task. I have come to believe that a key piece of the puzzle is to undertake electoral reform. Our electoral process seems to reinforce bad tendencies. If we have state funding of elections, simultaneous elections to the assemblies and the Parliament and only every five years; and elimination of criminal candidates, there will be a significant improvement in our governance and economic decision making. With 20-25% votes often ensuring a person or a party coming to power, I believe with these steps, the educated and enlightened citizens would have a greater say in electing governments. Today, many honest and capable people do not want to enter politics. In the new environment, they may not only vote in greater numbers but may also find joining politics an attractive vocation.  

All businessmen are congenital optimists. We have to be. Therefore, I hope and believe that we would have a much saner relationship between Government, business and society in our country in the future. Maybe, not in my lifetime but hopefully in my son's. I believe I am making a very small contribution to this process. This I shall continue to do, supported by the affection I have received from people from all walks of life. This affection is my real poonji, my real wealth. All else is maya.

Thank you.