Affirmative Action

With state's role reduced, business should intervene in social security

Mixed signals coming from India Inc with regards to caste-based reservations for jobs in private sector are as much an indication of its fears about profitability and competition as the lack of a strategic vision and clarity about the reach and range of corporations. While foreseeing loss of profits and competition,they fail to visualize the role of the business in the era of globalization. At the other end of the spectrum are industrialists, who have expressed their willingness to take “affirmative action” for the uplift of the Scheduled Castes and Tribes, and other underprivileged social segments of Indian society. These optimists are palpably more in tune with the global trend, where corporations have begun thinking in terms of extending themselves into the political landscape to acquire “political capital”. Sceptics merely view the risks involved in the issue of reservations; optimists on the other hand can see inherent opportunities in the whole process to improve the sustainability of their business. This point is well brought out in a recent Mckinsey study on the subject of “When social issues become strategic” -- the article suggests that, “companies must see the social and political dimensions not just as risks—areas for damage limitation—but also as opportunities.”If the 20th century had belonged to the state, then one can safely say that the 21st century marks the ascendancy of business in global power equations. Global corporations are now in the drivers seat-guiding the destinies of not only those who fall directly under their ambit but also influencing the lives of scores of people indirectly connected to them. The enhanced “sphere of influence” of the companies makes it imperative for them to plan and think on a broader scale.The primacy of shareholders in company’s affairs restricts them to securing the single bottom line of profitability. The emergence of stakeholders in companies' strategic thought processes ensures the satisfaction of what John Elkington, in his book Cannibals with Forks ,has identified as “triple bottom line” -- gratifying the financial bottom line while paying due cognizance to environmental quality and social justice within the area under their jurisdiction is what constitutes the post-modern profitability mantra. Many economists like Milton Friedman advocate that if capitalist corporations start talking about social justice and fair distribution, they would turn socialists. Such an approach to corporate governance is flawed because it caters only for financial risks. A company, with vast area under its command cannot afford to remain oblivious of the risks to its reputation, sustainability and credibility. The two major forces, which can wipe off a company from the face of earth, are weather and the people. These twin forces pose the biggest risk to the sustainability of the companies and the very economic system that breeds corporations. Therefore, those who talk about care for stakeholders take a more holistic view of the risks involved in running and sustaining a business. Such strategists often suggest that environment has to be cared for and the dignity of multitudes ensured to mitigate the threats to global capitalist order.Corporations are playing an important role in the global economic milieu. Will they continue to be mere economic actors or occupy an increasingly greater political space? According to John Ruggie, a UN Special Representative on Business and Human Rights, “TNCs will play an increasing role in the international public domain, where states are failing to meet the challenges.”In the event of reduced role of the state in providing social security network, a void is being created; this void will have to be filled by those who intend to manage the national and global economic assets. The management of these assets will require not only the legal license but also the societal approval. Ruggie sees this as “the beginnings of a fundamental reconstitution of the global public domain“. Public domain, according to Ruggie, is a “property of the people -- where authority flows from the mixture of power with legitimate social purposes, this is a space where entry to various ‘sectors and actors’ is granted after thorough scrutiny.” Indian business houses with long-term perspective understand that their future depends on getting a legitimate entry into the public domain through actions which are not only in conformity with business ethics but are also directed towards winning the hearts and minds of people. Unfortunately, other business enterprises, fail to appreciate the long-term strategic vision and capitalize on the opportunity available to them.