Saturday, October 4, 2014

"Clear Hold Build" prompts a fresh look at Corporate Responsibility

I have never been totally comfortable with the concept of Corporate Social Responsibility, particularly in India. Somehow, it always seemed to me that CSR provided an opportunity for companies to get away with various transgressions by making a big show of giving back to society, akin to the biggest crook in town giving the largest donations to the local temple.

But, don’t companies have to be responsible first before they can become socially responsible? Isn’t corporate responsibility an essential part of the social contract under which business operates?
What do I mean by corporate responsibility? Following the laws of the land. Paying taxes regularly. Not trying to find convoluted ways of avoiding taxes. Not knowingly causing harm to anyone. Not exploiting the weak, whether they are employees or members of the community.

Its noteworthy that even that apostle of free markets and unbridled capitalism, Milton Friedman, wrote that "there is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

That is what corporate responsibility should be at a minimum – staying within the rules of the game, not practicing deception or fraud.

Clear Hold Build

This perspective on corporate responsibility was only strengthened when I read Sudeep Chakravarti’s recent book Clear Hold Build: Hard Lessons of Business and Human Rights in India (HarperCollins, 2014).

In this book, Sudeep demonstrates how some of India’s largest corporate groups (and some foreign ones as well) have worked with the State to access raw materials like iron ore and bauxite from some of India’s poorest regions without following the laws of the land concerning environmental clearances, local public hearings, compensation, resettlement and rehabilitation. These are of course the very same areas that are at the centre of social conflict and often under the grip of maoist forces.

Many years ago, I spoke to one of India’s leading industrialists and asked him about competition from China. He was worried that Indian business might lose out since the Chinese entrepreneur is greedy for growth while the Indian entrepreneur is easily satisfied. Looking at the apparent willingness of Indian businessmen to operate in areas with high levels of social conflict, I wonder whether that distinction he made between Indian and Chinese entrepreneurs is true today!

Chattisgarh is one of the key states where such social conflicts exist. Until I visited Raipur recently, my image of Chhatisgarh was of a beautiful but poor state. That image got rattled when I realized that Raipur has many of the top hotel brands with sparkling new hotels. At the hotel where I was staying (incidentally, not one of the biggest brands) I saw lavish birthday parties being thrown for small kids; many of the cars parked outside were BMWs and Mercs. Mining and construction are the main sources of such wealth, I was told!

Not an Indian problem alone?

Of course, to be fair, irresponsible corporate behavior is not unique to India. In recent years, leading global automobile and pharmaceutical companies have been revealed to suppress adverse safety data and sell products that they knew were not completely safe. Some of the top apparel labels turned a blind eye to thousands of workers employed by their contractors working in obviously unsafe conditions in Bangladesh till a couple of major fire accidents forced them to take corrective action.

The Role of the State

Clear Hold Build paints an unflattering picture of business in India, but the State comes out looking even worse.  I recall reading Death in the Andes, Mario Vargos Llosa’s evocative account of exploitation by a mining company many years ago. When I read that book, I never imagined that such behavior could be emulated in a democratic country such as ours. But, there is increasing evidence of exactly that – besides this book, for a graphic account, see Paranjoy Guha Thakurta’s documentary Blood and Iron on illegal mining in Bellary. The State which should have been the protector of individual rights is not just a silent spectator but often an active participant in such loot, and in extreme situations the State is taken over by the exploiters themselves as we saw for a few years in Karnataka.

The saving grace is that in a democracy the electoral process ultimately catches up with the exploiters. The then ruling parties in the states paid a heavy price for what happened in Nandigram/Singur and Bellary respectively. But, not before a lot of damage was done to the local people, their land and their livelihoods.

Companies need to Develop New Capabilities

If companies are to become more responsible and respectful of human rights as Sudeep Chakravarti demands, they need to develop a new set of capabilities. For example, under the new Land Acquisition Act, companies will no longer be able to rely on the State using its powers of eminent domain to acquire land for their new factories. Companies will have to work with local communities and convince landowners to sell their land to the company.

As Beardsley et. al. wrote in their article “A New Era for Business” in Stanford Social Innovation Review (Summer 2007), companies will increasingly have to factor socio-political issues into their strategic decision-making process. This would mean company CEOs and senior managers would have to engage more with these issues, and with NGOs, communities, and other actors involved in the process of social policy formulation.  


Debate and discourse in India has been richer for those who have veered off the beaten track and explored our soft underbelly. Sudeep Chakravarti is certainly one of these explorers. Starting in traditional business journalism, he is today an expert on the maoist movement in India and the regions most affected by this phenomenon. In this book, he brings together his understanding of business and social conflict in a way that few others can.

[The views expressed here are the personal views of the author.]

1 comment:

  1. Enjoyed reading the article! Looks like one of those wicked problems. I wonder if growth imperative and greed are connected? Milton Friedman's 'Though shall play by the rules' looks like a teacher preaching in the class. Will read the book. Thanks for sharing.