entrepreneurship, corporate governance and indian...

Entrepreneurship, corporate governance and Indian business elites

Dr Ajit NayakBristol Business School

University of the West of EnglandFrenchay CampusColdharbour LaneBristol, BS16 1QY

UKTel: +44 (0)117 32 83442

Email: [email protected]

Professor Mairi MacleanBristol Business School

University of the West of EnglandFrenchay CampusColdharbour LaneBristol, BS16 1QY

UKTel: +44 (0) 117 32 83460


Professor Charles HarveyStrathclyde Business School

University of StrathclydeSir William Duncan Building

130 RottenrowGlasgow, G4 0GC

Scotland, UKTel: +44 (0)141 548 4385


Professor Robert ChiaUniversity of Aberdeen Business School

Edward Wright BuildingDunbar Street

Aberdeen AB24 3QYScotland, UK

Tel: +44-1224-272261Email: [email protected]

Published as: Nayak, A., Maclean, M., Harvey, C. and Chia, R. (2007) ‘Entrepreneurship, Corporate Governance and Indian Business Elites’, International Journal of Indian Culture and Business Management, 1(1-2), 9-27.

Entrepreneurship, corporate governance and Indian business elites

Abstract:

Entrepreneurship and corporate governance are key issues in the debate surrounding

competitiveness, sustainability and accountability. Despite the rhetoric of borderless

transnational corporations driven by homogenizing trends in globalization, nation

states and national identities continue to play an important role in structuring national

managerial mentalities and dispositions. Both corporate governance regimes and the

entrepreneurialism exhibited within a national context are, to a considerable degree,

self referring, being supported and informed by pre-existing social structures, norms

and practices. In this paper we examine the entrepreneurial spirit of Indian

industrialists, and the emerging importance of corporate governance for globalizing

Indian businesses. We explore the corporate lives and careers of the directors of the

SENSEX (top 30) companies from a practice perspective, and show that corporate

governance and entrepreneurialism emerge as mediating symbolic forms embedding

national values, institutional practices and individual dispositions. The data and

arguments presented in this paper stem from a larger, on-going study into

entrepreneurship, corporate governance and Indian business elites; our preliminary

analysis suggesting a complex web of connections between these social elements.

Rather than contrasting Indian culture and practices through a Western worldview,

thereby ‘othering’ India, we argue for a detailed, nuanced and culturally sensitive

investigation into how Indian businesses are constructed, sustained and perpetuated.

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Keywords: corporate governance; entrepreneurship; Indian business elites; practice

approach.

Introduction

Entrepreneurship and corporate governance are key issues in the debate surrounding

competitiveness, sustainability and accountability. Despite the rhetoric of borderless

transnational corporations driven by trends in globalization, improved

communications, interconnected financial markets and the rise of outsourcing and off-

shoring (Ohmae, 2005; Reich, 1991), nation states and national identities continue to

play an influential role in defining and structuring managerial mentalities and

dispositions (Dickens and Thrift, 1992; Harzing and Sorge, 2003; Jones, 2006; Yeung,

1998). As proponents of the ‘divergent capitalism’ thesis point out (Hall and Soskice,

2001; Quack et al., 2000; Whitley, 1999), firms and people are historically embedded

in their national culture. While over the past decade there has been some degree of

convergence in government economic policies and corporate governance mechanisms

in both advanced and developing countries, there remain pronounced and deep-rooted

structural, cultural and dispositional differences between nations that account for the

variety of responses observed with respect to the challenges of globalization (Dickens,

1994; Hirst and Thompson, 1992; Maclean et al., 2006; Stopford and Strange, 1991).

We find that entrepreneurial practices and corporate governance regimes are, to a

considerable degree, self referring; that is to say, they are supported and informed by

pre-existing social and institutional structures and dispositions, and retain much of

their intrinsic integrity in the face of new influences. Differences in the modus

operandi of governance in French and British companies, for example, cannot be

expunged simply by insisting on compliance with a universal code of best practice

(Maclean et al., 2006). Likewise, concern for the ‘triple bottom line’ of economic,

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social and environmental targets arguably predates and hence substantially shapes the

corporate governance movement in India. Such a concern is locally infused with the

notion of ‘trusteeship’; a concept widely promoted by Gandhi to help Indian

industrialists understand better their roles and obligations within society

(Balasubramanian, 2004). Similarly, the growing body of literature on immigrant

entrepreneurs has highlighted the importance of the relationship between original

national identity and entrepreneurial dispositions (Kloosterman et al., 2003;

Waldinger et al., 1990).

In India, we argue, corporate governance and entrepreneurship are deeply

entwined with national identity and cultural traditions and continue to impact upon

managerial priorities, attitudes and dispositions. Entrepreneurship in particular is an

intrinsic part of the fabric of the Indian nation, born of historical economic necessity.

We argue that there is a need to appreciate the subtle nuances and meanings

embedded and embodied in history, structure, symbols, language and practices, all of

which constitute a hermeneutic anthropology for the understanding of Indian culture

and business practice. In order to appreciate Indian corporate governance more fully,

we need to understand the lives, careers and social backgrounds of Indian business

elites and to turn the spotlight on the behaviours, mindsets and predilections of those

who sit on corporate boards, examining their kinship ties, friendship networks, and the

commonality of membership of educational and other organizations that underpin the

exercise of power and influence in the corporate world. The evidence and arguments

presented in this paper stem from an on-going study into the practices of Indian

business culture and corporate directors, and represent some preliminary findings of

our research.

The paper divides into four main parts. First, we introduce the Indian business

context, exploring the entrepreneurial spirit of Indian industrialists, and the emerging

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importance of corporate governance for globalizing Indian businesses. Secondly, we

discuss a practice approach to understanding organizations which emphasizes the

importance of ‘structuring structures’, habitus and dispositions (Bourdieu, 1990) in

understanding organizational rationality and economic action. Thirdly, we define

entrepreneurship and corporate governance from a practice perspective. Finally, we

develop the practice approach to understanding entrepreneurship and corporate

governance in exploring the lives and careers of the directors of the SENSEX

companies, which comprise the 30 largest companies on the Bombay Stock Exchange

(BSE) (see Table 1).

The Indian business context

British colonial rule in India (1858-1947) helped to create the foundations of a

modern economy, emphasizing market forces, access to information and capital

distribution; though the economic benefits this brought were distributed unequally

between the occupying and indigenous populations (Roy 2004). British expatriate

enterprise in India enjoyed prolific success in the nineteenth century; but its star began

to wane after World War I (Misra, 2000). By the time of its independence, India’s

new leaders had embraced a socialist and humanist view of economic development,

attracted by a soviet-styled form of ‘central planning’ (Mitra 1999). Mahatma Gandhi

also was influential in promoting the notion of ‘trusteeship’ in state and corporate

governance, urging business leaders to pay particular attention to their responsibilities

toward the nation and its people. Both Gandhi and Nehru had been educated outside

India, and were deeply influenced by the writings of social reformers such as John

Ruskin and William Morris, both of whom championed the rights of common people

(Mitra, 1999: 150). In myriad ways, therefore, the political leadership Gandhi and

Nehru offered was imbued with a strong sense of social justice.

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Whilst, in the nineteenth century, Indian enterprise had consisted ‘almost

exclusively [of] mercantile, smallscale, family firms’ (Misra, 2000: 334), by the latter

half of the twentieth century, some of these enterprises had been transformed into

large business conglomerates with global reach. Tata, India’s largest private-sector

employer, and now a widely recognised industrial giant in the global economy, whose

contribution to India’s GDP in 2004-05 amounted to 2.8 per cent (US$17.8 billion),

presents a ‘most outstanding example of the entrepreneurial dynamism present among

indigenous business groups’ (ibid.: 343). Founded by Jamshedji Tata in 1868, at a

time when the nationalist struggle was in its infancy, the group’s mission was infused

at an early stage with the ethos of nation building. This commitment to the national

interest is maintained to this day. A pioneer of welfare reform, Tata provides an early

example of the exercise of corporate social responsibility, introducing numerous

worker benefits, including healthcare and an eight-hour day, as well as a provident

fund for employees as early as 1920. In Jamshedpur, Tata ‘[runs] a township that puts

to shame many municipal corporations’ (Balasubramanian, 2004: 76). The group’s

commitment to good governance is depicted on its website as a triangle; the three

equal sides are representative of employees, shareholders and customers, with

management at the centre (www.tata.com).

While Tata may appear to be a special case, its success, Misra argues, has been

mirrored by other Indian entrepreneurs, such as Seth Shiv Narayan Birla, who began

trading in cotton in the 1850s. From modest beginnings, his son, G.D. Birla, set up

operations in the textile, aluminium, chemicals and cement industries. He enjoyed a

close relationship with Gandhi, his business objectives going hand-in-hand with a

commitment to national freedom. His grandson, Aditya Birla, turned the Birla

companies into world leaders in several sectors (including viscose stable fibre,

insulators, carbon black and the refinement of palm oil), while Aditya’s son, Kumar

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http://www.tata.com/

Mangalam Birla, united them in the 1990s under the umbrella of the Aditya Birla

group. To counter the group’s patriarchal tenor, K.M. Birla introduced a company

scholarship scheme to nurture the Indian business leaders of tomorrow, and increased

the number of women managers. Meanwhile, his commitment to good governance

was underscored by his being invited by the Securities and Exchange Board of India

(SEBI) to chair a key governance committee, set up in 1999 to improve standards of

governance across Indian businesses.

The 1990s, which saw the opening up of the Indian economy to foreign firms

following two decades of insulation, witnessed a flourishing of entrepreneurial

initiatives and steady GDP growth at around 7 per cent annually. The Indian economy

is now the fourth largest and the second fastest growing in the world, while in 2007,

36 Indian business leaders featured among the world’s growing band of billionaires

(Economic Times, 2007). The era of the Indian business elites has come to pass.

The ‘practice turn’ in understanding structure, agency and organizations

Our theoretical lens for researching Indian entrepreneurialism and corporate

governance draws inspiration from the practice approach to understanding the nature

and structure of social phenomena and social life. The practice approach eschews the

traditional distinctions between agency-structure, micro-macro, individuals-

institutions, and economics-sociology in explaining human action. What it accentuates

is the eminently ‘situated’ nature of all human action, especially entrepreneurial

action and corporate governance practices. Granovetter’s (1985) often cited paper on

the embeddedness of action in networks of interpersonal relationships, for example, is

such an attempt to overcome the explanatory schism between rational action and self-

interest in economics and structural determinism in sociology. The practice approach

takes the notion of relational embeddedness seriously by drawing on site ontology

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(Schatzki, 2002) to explain human action. Site ontologies ‘conceptualize the social as

nexuses of practices that carry spaces of intelligibility’ (Schatzki, 2005: 470). Unlike

the individual-social, agency-structure debate, site ontology posits a trans-

individuality in which ‘cultural transmission, socialization, institutionalized

constraints, embodied mannerisms, etc., play a crucial role in explaining human

doings’ (Chia and MacKay, 2007: 227). From this perspective, the intentions and

purposes of individual actors are insufficient to explain their propensities to act in a

manner congruent with the expectations of their social community.

We propose that the practice approach is a theoretically sophisticated way of

understanding human affairs, and associate the approach with three main theoretical

presuppositions. First, rather than presuppose a conscious, rational, self-motivated

individual acting deliberately to achieve pre-specified ends, agency is attributed to

‘structuring structures’; built-in convergent tendencies that are immanent in human

situations. Structuring structures help to influence who makes it to the top in any

country or organization; examples include family, education, and membership of

corporate and professional bodies (Maclean et al., 2006). They are bound up, too,

with Bourdieu’s concept of ‘habitus’, the ingrained and socially constituted

dispositions of social classes that lead actors to make ‘choices’ and ‘decisions’ that

curiously reproduce existing social structures and status distinctions. Habitus gives

individuals a sense of how to think, feel and act in their daily lives, directing their

actions and inclinations without precisely determining them. It gives them a ‘feel for

the game’, a practical sense of what constitutes appropriate behaviours in the

circumstances, and what does not. It is the repository of embedded dispositions that

have become ‘natural’, perceptible in the posture, mannerisms, accent and virtually

every tiny movement of an individual (Thompson, 1991: 13).

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Secondly, the practice approach emphasizes the importance of latent, hidden

and unobservable influences in place of manifest actions and intentions (Cooper,

2005). As Chia and MacKay (2007: 227) insist, practices are not the ‘visible doings of

actors per se, but culturally and historically transmitted regularities detectable through

the patterns of activities actually carried out’. They are ‘temporarily unfolding and

spatially dispersed nexus of doings and sayings’ (Schatzki, 1996: 89) organized

around ‘shared practical understanding’ (Schatzki, 2001: 2). Hence, the practice

approach calls for closer attention to accents, gestures, expressions, local habits and

practices that are acquired mostly unconsciously through being immersed in a

community.

Thirdly, practices imply that actions are not driven by rational means-ends

reasoning. Individuals do not require specific goals in order to act. Rather, most

everyday actions involve ‘mindlessly’ coping with demands encountered in-situ.

Actions may therefore be purposive without there being an overall purpose in mind

(Dreyfus, 1991). To act purposively is to attend to resolving an immediate

impediment at hand, to seek relief from an undesirable situation without any

presumption of some pre-thought end-goal. Purposefulness, on the other hand, implies

planning and deliberate action.

To summarize, practices have a history and trajectory: they are better

conceptualized in terms of directionality, momentum, propensities and dispositions.

Practices are not the visible activities that individuals and organizations engage in, but

rather the tacit, invisible and intractable background consistencies that shape human

action. Although practices pose significant methodological problems for research,

they are discernable patterns of action, embedded and transmitted through historically

and culturally accumulated dispositions. In the next section we examine the

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implications of such a practice approach to theorizing entrepreneurship and corporate

governance.

Entrepreneurship as everyday ‘making do’

The practice approach to entrepreneurship does not start with the and the who of

entrepreneurship. Instead, the starting point is how entrepreneurs engage with and deal

with the emerging situations they find themselves in on a day-to-day basis. We argue

that most entrepreneurs we do not consciously and deliberately seek opportunities,

mobilize resources, plan their actions and deploy their efforts in pre-defined

entrepreneurial ventures. Rather, we view entrepreneurs as essentially being defined

by timely, opportunistic and transgressive interventions. The entrepreneur ‘enters’ and

opportunistically ‘grasps’ from the inside that which is unnoticed or deemed

unavailable by others. In other words, entrepreneurs do not adopt a detached

spectator’s viewpoint towards the world; they do not survey and ‘map’ out

opportunities or represent them in the mind prior to taking purposeful action. Rather,

they respond to circumstances by feeling their way ‘through a world that is itself…

continually coming into being’ (Ingold, 2000: 155). Self and world (e)merge in the

performing of concrete entrepreneurial activities so much so that individual identity

and the efficacy of action occur sponte sua; it does not depend upon some pre-

designed plan of action but results from continuous timely and on-going adjustment

and adaptation to local circumstances, relying on wit, duplicity and cunning

intelligence.

In The Practice of Everyday life, de Certeau (1984: 91-93) finds himself at the

top of the ill-fated World Trade Centre in New York, looking down on the city below,

and enjoying the voyeuristic pleasures of seeing it all neatly laid out as one would

view a map of a city. De Certeau contrasts this view with that of pedestrians finding

9

their way around at street level. Unlike the detached transcendent observer looking

from atop the building, the pedestrians on the streets below do not have a ‘bird’s-eye’

view or comprehensive picture of the city, but instead experience a series of

migrational outlooks; horizons of comprehension that are continuously evolving and

changing as they actually walk the streets at ‘ground zero’. They must act by

‘reaching out’ from wherever they find themselves, feeling their way towards a

satisfactory resolution of their immediate circumstances.

De Certeau here is making a vital distinction between explanations of human

behaviour from two different viewpoints. On the one hand, it presupposes the ability

to survey, abstract, fix and define from afar; on the other, there is the kind of local

intervening that is inventive and that emerges locally from the need to continuously

adapt, adjust and make do through ‘temporarily borrowing the resources of

established systems, rules and procedures to effect desirable outcomes’ (de Certeau,

1984: 35-37). The former presuppose a defined, locatable, Cartesian thinking subject

that is distinct and separated from its environment. It assumes that actions are

necessarily preceded and motivated by prior intentional states relying on cognitive

maps and mental representations. The latter, on the other hand, presupposes a lack of

firm identity and the ability to only operate opportunistically on the ‘space of the

other’ (de Certeau, 1984: 37). In other words, it presumes that individuals do not have

the luxury of detached uninvolved pre-thought and planning. Like a fish in water, they

can only operate ‘blow by blow… (accepting) the chance offerings of the moment,

and seize on the wing the possibilities that offer themselves at any given moment’

(ibid). Tactics rely on small, unheroic and seemingly inconsequential moves involving

wit, trickery, surprise and opportunistic interventions which transform a seemingly

unfavourable situation into a favourable outcome (de Certeau, 1984: 39). Timeliness

in intervention is a crucial weapon of such opportunistic interventions.

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In articulating this vital difference between ‘strategies’ and tactics’, de Certeau

reminds us of Heidegger’s (1971: 148) distinction between the building and dwelling

modes of engagement. In the building mode it is supposed that there is an initial pre-

cognitive separation between the actor/perceiver and the world, so much so that the

actor/perceiver has first a need to ‘construct mental representations and models of the

world prior to any practical engagement with it’ (Ingold, 2000: 178). Any

entrepreneurial action is thus ‘mapped’ and explained in terms of a purposeful means-

ends causal relationship. In the dwelling mode of existence, on the other hand,

entrepreneurs are assumed to be intimately immersed and inextricably intertwined

with their surroundings in all its complex interrelatedness. In their everyday activities,

they engage in ‘wayfinding’ (Hutchins, 1995), creating action pathways that radiate

outwards from their concrete existential situations. Like the walkers in de Certeau’s

(1984) observation, entrepreneurs do not traverse and experience the city streets as

represented on a street map in terms of routes and locations. Rather, in such a

dwelling mode ‘decisions’ and ‘actions’ emanate from being in situ and occur sponte

sua. Here, the efficacy of action in achieving successful outcomes does not depend

upon some pre-designed plan of action, but results from continuous timely and on-

going adjustment and adaptation to local circumstances. This, we maintain, better

reflects the entrepreneur’s evolving experience of events around him/herself. It is a

mode of explanation of entrepreneurship which has been much overlooked in the

literature on entrepreneurship. This is what the practice view emphasizes; one which

concentrates on skills of wit, timeliness, opportunism and inventive coping. Such an

entrepreneurial capability can be linked to what Detienne and Vernant (1974/78) in

their study of ancient Greek culture and society called mētis.

Mētic intelligence is ‘furtive, discretionary and simultaneous, it spurns

idealizations and established representations’ (Baumard, 1999: 54). It is the kind of

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knowing required to ‘escape puzzling and ambiguous situations’ (Detienne and

Vernant, in Baumard, 1999: 64). It is applied to situations that are ‘transient, shifting,

disconcerting and ambiguous, situations that do not lend themselves to precise

measurement, exact calculation or rigorous logic’ (Detienne and Vernant, in Baumard,

1999: 65). Mētis operates through disguise concealing its true lethal nature beneath a

reassuring exterior. It is characterized by three crucial aspects: a) the quality of agility,

suppleness, swiftness, mobility; b) dissimulation, the art of seeing without being seen

or acting without being seen to act; c) vigilance and alertness. The Yale political

scientist and anthropologist James Scott maintains that ‘all human activities require a

considerable degree of mētis’ (Scott, 1998: 313). For Scott, ‘Knowing how and when

to apply the rules of thumb in a concrete situation is the essence of mētis’ (Scott,

1998: 317, emphasis original). Scott describes the experience of European settlers in

North America who turned to local knowledge regarding the planting of crops. Thus:

‘They were told…to plant corn when the oak leaves were the size of a squirrel’s ear. Embedded in this advice….is a finely observed knowledge of the succession of natural events in the New England spring. For Native Americans, it was this orderly succession of, say, the skunk cabbage appearing, the willows beginning to leaf, the red-winged blackbird returning, and the first hatch of the mayfly that provided a readily observable calendar of spring’ (Scott, 1998: 311-312).

It is clear that mētis is a kind of knowing derives from living within and becoming

intimately acquainted with local conditions ‘on the ground’ and not from some

detached observer’s point of view. Mētis suggests an acute sensitivity and awareness

of how immersed in a given set of circumstance one finds oneself, one can still

discover strategic advantage through alertness, resourcefulness, guile and

opportunism to frame and reframe problematics and hence to transform unfavourable

circumstances into favourable outcomes. Mētic intelligence is, to borrow from

Bourdieu (1990), a consequence of habitus; a style, demeanour, and culturally-

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mediated set of predispositions which generates competent practices ‘without

presupposing a conscious aiming at ends or an express mastery of the operations’

(Bourdieu, 1990: 53).

What all this implies is that beneath the aura of human rationality, intention and

purposefulness, humans have also acquired a survivalist legacy for practical

‘mindless’ coping in the course of evolution which has remained theoretically

unexamined since the time of the ancient Greeks. This is the underlying basis for

understanding the practice of entrepreneurial opportunism. In contrast to traditional

preoccupation with the issues of competitive advantage, resources and strategic

positions, metis describes an oblique, indirect entrepreneurial approach towards

entrepreneurship that is inexhaustibly inventive and opportunistic; one that is not

exhausted by the depletion of resources and accumulated advantage, nor fazed by a

lack of power and dominance.

Corporate governance as common mores

Corporate governance has been defined variously as ‘the system by which companies

are directed and controlled’ (Committee on the Financial Aspects of Corporate

Governance, 1992: 15), or ‘the mechanisms by which companies are controlled and

made accountable’ (Peck and Ruigrok, 2000), or more specifically as ‘the ways in

which suppliers of finance to corporations assure themselves of getting a return on

their investment’ (Schleifer and Vishny 1997: 737). Such definitions, however, fail to

capture the pluralism of corporate governance regimes (Aguilera and Jackson, 2003;

Pedersen and Thomsen 1997), reflected in the growing number of national codes in

existence. Concern for corporate governance is increasingly spreading to the

developing world. Governance systems in transition economies, however, are likely to

differ markedly from those in the developed world (Muhkerjee Reed and Reed, 2004).

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The Indian governance system is something of a hybrid of the outsider-dominated

Anglo-American model, and the bank-dominated, insider systems typical of

continental Europe and Japan (Dwivedi and Kumar Jain, 2005). The corporate

governance movement began in India in 1996, when, influenced by the Cadbury

Report (1992) and its Code of Best Practice, the Confederation of Indian Industry

(CII) set up a national taskforce entrusted with the task of producing a voluntary

governance code which all Indian companies could adopt. This led to the Desirable

Corporate Governance code of 1998, followed in 2000 by the Report of the Kumar

Mangalam Birla Committee.

The catalysts for reform included not only the general drivers outlined above,

namely faster communications in a globalizing world, interconnected financial

markets, and the international corporate governance movement which was gathering

momentum, but were also specific to the Indian context. In the early 1990s, Indian

companies, having existed in a protected, state-led economy since the early 1970s,

needed to attract investment from external sources, and had to demonstrate good

governance to do so. India, moreover, has been dogged by stock market scams since

1992, following the liberalization of capital markets (Muhkerjee Reed and Reed,

2004). One particular scam concerning major securities, which came to light in April

1992, sent the value of shares listed on the BSE into freefall. A further scandal in

1993-94 entailed so-called disappearing companies, when small investors lost their

savings to unscrupulous managers, who made public share issues using misleading

prospectuses and then siphoned off the proceeds.

The Report of the Kumar Mangalam Birla Committee on corporate

governance, whose mandatory requirements came into effect in March 2002, has had

the effect of making boards more professional, with the functions of chairman and

CEO now more likely to be separate. Family control remains powerful in Indian

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corporations; however, family members who sit on boards are now more likely to be

better trained than hitherto (Balasubramanian, 2004). Ownership and control is also

more distinct. Corporate governance reforms improved transparency by requiring the

disclosure of equity ownership of listed companies, while the 1997 Substantial

Acquisition and Takeover Act highlighted the importance of minority blockholders

(Selarka, 2006). The Kumar Mangalam Birla Committee defined Indian corporate

governance as one which aspires to marry together the competing needs of different

stakeholders in seeking the ‘enhancement of long-term shareholder value while at the

same time protecting the interests of other shareholders’ (SEBI press release, 4 June

1999), thus combining ethics and morality with sound business sense.

Etymologically, ethics and morality refer to the idea of mores, with its two-

fold meaning of considered to be good and imposing itself as obligatory. In the

business ethics literature, the terms morality and ethics articulates these two

meanings. Ethics derives from the Aristotelian teleological perspective, and focuses

on the character of the person who is aiming to lead a virtuous life (MacIntyre, 1984;

Nielsen, 2006). Morality draws on the Kantian deontological perspective, and ‘is

concerned with the norms, values, and beliefs embedded in social processes which

define right and wrong for an individual or a community’ (Crane and Matten, 2007:

8). In general, business ethics researchers examine the implications of norms and

morality and their consequences within a business context. Crane and Matten point

out that, ‘ethics is concerned with the study of morality and the application of reason

to elucidate specific rules and principles that determine right and wrong for a given

situation’ (ibid.). In contrast, however, we argue for the primacy of ethics over

morality. For us, morality constitutes a limited, albeit legitimate and necessary

representation of the ethical aim. From a practice perspective, corporate governance is

viewed as a mediating symbolic form that embeds institutional and social practices as

15

well as individual dispositions. In other words, rather than privilege laws, social

norms and institutional rules of the game (North, 1991; DiMaggio and Powell, 1983)

that constrain economic action, we argue for understanding norms as subordinate and

complementary to ethics which is encapsulated in understanding ethics as ‘aiming at

the “good life” with and for others , in just institutions’ (Ricoeur, 1994: 172).

Our conceptualization of ‘the good life’ is not an attempt to depict a utopian

world, nor some other-worldly form of salvation. Instead, in keeping with the practice

approach, ‘the good life’ is a teleological internal to practice itself. As MacIntyre

(1985) puts it, every practice establishes a set of ‘internal goods’ which can only be

attained by participating in the practice itself. In contrast to external goods (e.g.

money), which can be obtained without such participation, internal goods emphasize

the value inherent in the act of doing itself. Internal goods are derived from ‘standards

of excellence’ exemplified by experts in the practice that allows us to have a sense of

the internal goods immanent in a practice (Ricoeur, 1994: 176). ‘Aiming at a good

life’ represents the sustained exercise of practical wisdom (phronesis) which forms

the basis of self-esteem.

Practical wisdom and self-esteem are inextricably bound up with others, and

call for solicitude. Solicitude is more than ‘obedience to duty’. Its status is that of

‘benevolent spontaneity, intimately related to self-esteem within the framework of the

aim of the “good” life’ (ibid.: 1990). Rather than the language of ‘stakeholders’ with

its reference to rights, responsibilities and obligations of corporations to various

constituencies, what we propose here is a way of thinking about ‘with and for others’,

that is akin to sympathy and friendship. These are grounded in practices and constitute

practical wisdom and self-esteem involving the capacity of the self to feel the

suffering of the other and to respond spontaneously to the latter with benevolence.

Such is ‘perhaps the supreme test of solicitude, when unequal power finds

16

compensation in an authentic reciprocity in exchange, which, in the hour of agony,

finds refuge in the shared whisper of voices or the feeble embrace of clasped hands’

(Ricoeur, 1994: 191). The capacity of the self to respond to the call of the other in

terms of feeling ‘summoned to responsibility’ (ibid.: 189) is well expressed in

Nussbaum’s (2001) notion of the ‘fragility of goodness’.

Sympathy, friendship and goodness imply the notions of fairness and justice

borne out of aiming for a good life with and for others. Approaching institutions and

corporate governance in this way allows us to maintain the notion of common mores

and power-in-common embedded in institutions. Without this connection, institutions

can become, as may be the case with governance codes and regulations, detached

from everyday action. We point to the word droit in French which incorporates both

meanings: un homme droit (a righteous man) and le droit (law school). Hence, the

notion of justice embedded in institutions ‘faces in two directions: towards the good,

with respect to which it marks the extension of interpersonal relationships to

institutions; and towards the legal, the judicial system conferring upon the law

coherence and the right of constraint’ (Ricoeur, 1994: 197). Hence, institutions are not

reified entities that represent individual ethics in law or codes of conduct, but rather

‘the diverse structures of wanting to live together, which, to this end, secure duration,

cohesion, and distinction’ (ibid.: 227).

To summarize, social integration is achieved through the reinforcement of the

mediatory symbolic form of corporate governance through which a business

community constructs and maintains its mission, and, more importantly, aims to

extend the ‘good life’. At present we recognize only the ideological and regulatory

force of corporate governance to stabilize meaning and action temporarily. What we

argue here is that corporate governance also draws upon culturally dominant

17

discourses of truth-telling and promises, embedded in social practices. This is what

we mean by adopting a practice approach to corporate governance.

Indian business elites

Our approach to understanding Indian business culture draws its inspiration from the

culturally-specific Indian context (Mathew and Kumar, 2005) in contrast to the

common tendency to view India as the ‘other’ to Western societies, and the

temptation to impose an Anglo-American worldview on the former. Thapar, an

eminent Indian historian, maintains that the ‘so-called discovery of India (by

European scholars) was largely through selected readings in Sanskrit’ which tended to

emphasize non-historical aspects of Indian culture by emphasizing its enduring

concern with metaphysics and the subtleties of religious beliefs and to play down the

more tangible aspects of Indian culture’ (Thapar, 2002: 4-5). Friedrich Max Müller, a

philologist and Orientalist, for instance, drew on his study of the Vedas and Sanskrit

to define Indian life in terms of passivity and meditation. Müller’s India, What can it

Teach us? (1883) and Biographies of Words and the Home of the Aryas (1888), along

with Mill’s History of British India (1826), were influential in defining India during

the colonial period, and were key texts in training British managers working for the

East India Company. All this was done without setting foot on Indian soil! Similarly,

for Max Weber, there existed a dichotomy in values, ‘Indian values being described as

“spiritual” and European values as “materialistic”, with little attempt to juxtapose

these values with the reality of Indian society’ (Thapar, 2002: 5). Weber distinguished

between the Protestant spirit underlying European capitalism and the lack of

economic rationality in Hinduism to explain the non-emergence of capitalism in India.

In Weber’s work ‘caste was projected as distinct and separate, with no social action

across castes being possible … Caste was linked to religion and the close connection

18

between the two was seen as a barrier to economic change’ (Thapar, 2002: 8). The

common misconception of comparing class in Western societies to caste in Indian

society still dominates the Western worldview of India, serving as a warning to any

researcher, particularly if trained in Western modes of thought, in embarking on

research into Indian business culture.

So what should be the starting point for research on Indian culture and

business? Following Ramanujan, we argue that:

Both public culture and domestic culture cannot be fully understood without knowledge of the folk idiom. Every kind of Indian cultural practice, every Indian cultural performance…is indebted to oral traditions and folk forms….The aesthetics, ethos, and worldview of a person are shaped in childhood and throughout early life, and reinforced later, by these verbal and nonverbal environments. In a largely non-literate culture, everyone – whether poor or rich, high caste or low, professor, pundit, or ignoramus, engineer or street hawker – everyone has inside him a large non-literate subcontinent. (Ramanujan, 1994: iii-xiv)

This ‘large non-literate subcontinent’ is one that is found in everyday practices and

practical coping. Folktales, local narratives and idioms serve as the ‘structuring

structures’ of Indian culture. This context-sensitive culture imbues Indian folktales.

Children’s stories of Akbar and Birbal, Tenali Rama and Mulla Nasseruddin, for

example, all point to a contextual understanding. They indicate a notion of corporate

governance as common mores, and entrepreneurship as opportunistic ‘making do’.

A context-sensitive study of Indian culture and business management calls for

a detailed investigation into everyday business practices. Such a study demands a

culturally sensitive, historically informed prosopographical approach to empirical

work (Maclean et al., 2006), with the aim of producing a ‘collective biography’. We

identified the top companies in India from the SENSEX list, which comprises a mix

of old and new companies. As expected, the oldest companies have a strong colonial

connection, the State Bank of India, ITC, and Hindustan Lever all having their roots

19

in British rule, or are linked to the leading industrialist families of India, now in their

third or fourth generation. Although there have been significant changes in ownership

and the membership of corporate boards, industrialist families still play a major role.

ACC, for example, previously owned by the Tatas, was sold to Gujarat Ambuja in

2000, before being bought by Holcim, a Swiss company, in 2005.

[Insert Table 1 about here]

The SENSEX also features post-liberalization entrepreneurs, such as the Mittal

family, who founded Bharti Airtel in 1995, and represents recent successes in

software (Infosys, Satyam Computer Services and Wipro) and pharmaceutical

industries (Cipla and Dr Reddy’s).

Data were collected on directors of the SENSEX companies using a census

date of 1st January 2006. Excluding overlapping directorships, our study consists of

319 directors. We collected data from publicly available sources, in particular a BSE

database (www.directorsdatabase.com) relying on voluntary disclosure by the

companies listed on the BSE. At the time of data collection, there were no disclosures

by ONGC and Infosys. To find information on the directors of these companies, and

to cross-reference the other directors, we turned to company annual reports and

accounts. We also searched for personal profiles of directors in the pages of the

popular Indian business press. By retracing individual destinies in the context of

family networks, educational solidarity, career paths and interest groups,

prosopography enables the researcher to integrate the individual into social history.

The design allows for continuous refinement and updating as new sources of

information are integrated. This task will be on-going during the life of the project.

20

http://www.directorsdatabase.com/

Data analysis and results


As Table 2 demonstrates, Indian boards typically consist of experienced individuals:

the average age is high, 60 for men and 56 for women. This compares with an average

age of 55 for men and 52 for women for corporate directors serving on the boards of

top UK 100 companies in 1998 (Maclean et al., 2006). As many as 49 Indian directors

are in their seventies or eighties, while over half of male directors (50.6 per cent) are

aged 60 or over, past the official retirement age of 58. This indicates the attention paid

to seniority. It also suggests that senior family members are part of the board. That of

Hero Honda Motors, for example, includes brothers Satyan and Munjal (aged 89),

Brijmohan Lall Munjal (83) and Om Prakash Munjal (78); it also embraces the next

generation, in the person of Pawan Munjal (50).

Family ownership remains significant among SENSEX companies, unlike in

Britain, where none of the top 100 listed companies is family-dominated (Maclean et

al., 2006). Companies with family members on their boards include Hero Honda

Motors and Reliance Industries with four related members; Bharti Airtel, Dr Reddy’s

and Ranbaxy with three related members; and Cipla, Grasim, Gujarat Ambuja

Cements, Hindalco and Satyam Computers with two related members. With seven

related members, Bajaj Auto has the greatest number of family members on its board;

they hold, moreover, executive positions. The board also consists of two other

industrialist families – Kirloskar and Godrej – as independent directors.

At the other end of the spectrum, as Table 3 reveals, the youngest board

members are Malvinder Singh and his brother Shivinder, who serve on the board of

21

Ranbaxy, an international pharmaceutical company. In keeping with family-led

businesses, they are third-generation family members of the entrepreneur that founded

Ranbaxy, Bhai Mohan Singh. In contrast, Narendra Murkumbi, who serves on the

board of ICICI Bank, owes his meteoric rise to India’s entrepreneurial culture and

meritocracy. Murkumbi is the founder and managing director of Shree Renuka Sugars

(SRS), which first listed on the BSE in 2005. With a bachelor’s degree in electrical

and communication engineering from Gogte Institute of Technology in Belgaum and

an MBA from IIM Ahmedabad, he had the vision to build a sugarcane mill in the

village of Shindogi, with the backing of his mother and an investment of Rs 5000

from 9,900 local farmers. All three directors subscribe to the notion of living a good

life with and for others: Ranbaxy produces a wide range of quality, generic, affordable

medicines, while the success of SRS has transformed the lives of poor farmers in the

region.


Of the 13 women who hold directorships on the boards of SENSEX

companies, more than one third (five) hold executive directorships (see Table 4). This

contrasts with just 13.4 per cent of female board members who held executive

positions on the boards of leading British companies in 1998 (Maclean et al., 2006).

The numbers we are dealing with here are small, 13 and 67 respectively; nevertheless,

it is clear that in both countries women still have a long way to go before collectively

they make their mark as business leaders, though there are notable exceptions. ICICI

Bank, with three women serving as Managing Directors, stands out as a pioneer of

gender equality in the male-dominated banking industry. Although Lalita Gupte, who

has now retired as managing director, and Kalpana Morparia, who retired in May

22

2007, will alter the gender balance of the board, Chanda Kochhar, deputy managing

director, is one of the front-runners to assume the role of managing director, along

with Shikha Sharma, managing director of ICICI Prudential. Renu Karnad, a director

at HDFC Bank, also helps to shift the gender balance towards women in the banking

industry. Chua Sock Koong, recently appointed CEO of Singapore

Telecommunications, is the only non-Indian woman to occupy an executive

directorship in a SENSEX corporation. She represents a small, albeit significant group

of non-Indians on the board. Other women directors follow the family-led business

tradition, including Shobhana Bhartia (daughter of K.K. Birla, and vice-chairperson

and editorial director of Hindustan Times), Rajashree Birla (wife of Aditya Birla and

mother of K.M. Birla), and Suman Kirloskar (a senior member of the Kirloskar

family, one of the major industrialist families and family friends of the Bajajs).


As Table 5 reveals, Indian business elites regard educational achievement as

an important mark of distinction. The vast majority of directors are graduates, with 11

per cent of directors holding a PhD, almost double the proportion of top directors

holding PhDs in Britain in 1998 (6 per cent) (Maclean et al., 2006). Moreover, in

contrast to the proportion of British directors holding only a first degree in 1998 (45

per cent), just 27 per cent of Indian directors fell into that category in 2006. A large

proportion (40.7 per cent) had obtained a higher degree.


23

Surprisingly, perhaps, 50 per cent of the directors in our study did not attend

an elite university, in India or overseas (see Table 6). Although we recognize the

problems associated with classifying elite and non-elite institutions, we included the

Indian Institute of Technology (IIT), Indian Institute of Management (IIM) and the

Indian Institute of Science (IISc) as elite institutions of higher education. We

incorporated other Indian establishments, e.g. the Indian Agricultural Research

Institute, as non-elite. It could be argued that some of the long established

universities, such as the University of Delhi, should also be classified as elite.

However, as we extend our study to embrace schools, we aim to identify the close

connections between elite private establishments and university education, which may

lead to our re-classifying the elite universities. At present, our data suggests that

Indian establishments of higher education, attended by more than half of all directors,

are likely to play a greater role in structuring elite dispositions than overseas

universities, accounting for 40 per cent of known attendances. A small percentage of

top directors (2.4 per cent) may be classified as ‘super-elite’, having attended elite

institutions both in India and overseas: this group includes K.M. Birla.


Conclusion

Our preliminary analysis suggests a complex web of connections between

entrepreneurship, corporate governance and Indian business elites. To understand

these connections, we have argued that we need to be sensitive to the contextual way

of being in India. Rather than impose a Western worldview and examine Indian

culture and business by ‘othering’ India, we have argued for a detailed, culturally

sensitive investigation into how Indian businesses are constructed and perpetuated.

24

It is important to recognize the rich history of India’s business elites. The

cultural substrata that underlie societies go deep. Change at this deeper, sedimentary

level is slow, and we have been struck here, as elsewhere, by the strength of cultural

reproduction, inducing continuity whilst not preventing change (Maclean et al., 2006).

Our preliminary investigations suggest that a strong sense of meritocracy underpins

Indian business elites, coexisting with notions of hierarchy and patriarchy. A

pronounced diversity in terms of age, gender, qualifications and global connections is

noticeable in our relatively small group of corporate boards, suggestive of a spirit of

inclusivity. It is also readily apparent that entrepreneurship forms an innate part of the

fabric of the nation, fundamental to the Indian national identity. Yet, we have been

struck by the degree to which this is infused with a deep-seated ethical code, going

hand-in-hand – despite occasional stock market scams – with a belief in good

corporate governance, whose roots go back to Gandhi, the nationalist struggle, and

beyond. This ethos is likely to serve Indian companies well: those who fail to

implement good governance practices in an increasingly globalized world may lose

out in the competition for capital in today’s markets. As a developing country, whose

corporate governance systems are still at an evolutionary stage, yet which is predicted

to be a major player in the global economy of the future, India offers an excellent

example for other liberalizing economies to follow.

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Table 1: SENSEX companies in 2006Company Founded Company FoundedState Bank of India 1806 Reliance Industries 1966Tata Steel 1907 Tata Consultancy Services 1968ITC 1910 NTPC 1975Hindustan Lever 1931 HDFC 1977Cipla 1935 Infosys Technologies 1981ACC 1936 Maruti Udyog 1983Larsen & Toubro 1938 Dr Reddy’s Laboratories 1984Bajaj Auto 1945 Hero Honda Motors 1984Wipro 1945 Gujarat Ambuja Cements 1986Grasim Industries 1947 Satyam Computer Services 1987ONGC 1955 ICICI Bank 1994Hindalco Industries 1958 Bharti Airtel 1995Tata Motors 1960 HDFC Bank 1995Ranbaxy Laboratories 1961 Reliance Energy 2002BHEL 1962 Reliance Communications 2004

Table 2: Age profiles of Indian elites in 2006Age Female % Male %under 30 0 0.0 0 0.030-39 0 0.0 9 3.340-49 3 23.1 29 10.650-59 6 46.2 98 35.660-69 3 23.1 91 33.170-79 1 7.7 40 14.6over 80 0 0.0 8 2.9

Mean Age 56 60Standard Deviation 8.3 10

Table 3: Youngest directors on the board of SENSEX companies in 2006Name Age Company RoleShivinder Singh 31 Ranbaxy Laboratories Non-Executive DirectorMalvinder Singh 34 Ranbaxy Laboratories CEO & Managing DirectorNarendra Murkumbi 36 ICICI Bank Independent DirectorSanjivnayan Bajaj 37 Bajaj Auto Executive DirectorManish Kejriwal 38 Bajaj Auto DirectorPulak Chandan Prasad 38 Bharti Airtel Independent DirectorHital Meswani 38 Reliance Industries Executive DirectorSatish Kallam 39 Dr Reddy's Laboratories Managing DirectorKumar Mangalam Birla 39 Grasim Industries Non-Executive ChairmanRajiv Bajaj 40 Bajaj Auto Managing Director

Table 4: Women directors on the board of SENSEX companies in 2006Name Age Company RoleChanda Kochhar 45 ICICI Bank Deputy Managing DirectorLeena Srivastava 46 Reliance Energy Independent DirectorChua Sock Koong 49 Bharti Airtel DirectorPallavi Shroff 50 Maruti Udyog Independent Director

30

Shobhana Bhartia 50 Hero Honda Motors Independent DirectorRenu Karnad 54 HDFC Executive DirectorKalpana Morparia 57 ICICI Bank Joint Managing DirectorLaura Cha 57 Tata Consultancy Services Independent DirectorLalita Gupte 58 ICICI Bank Joint Managing DirectorRajashree Birla 61 Grasim Industries Independent DirectorSyeda Imam 65 Bharti Airtel Independent DirectorMangalam Srinivasan 68 Satyam Computers Services Independent DirectorSuman Kirloskar 71 Bajaj Auto Independent Director

Table 5: Highest qualification attained by SENSEX directors in 2006Qualification %with PhD 32 11.0with professional qualifications 75 25.9with MBA/AMP/OPMP 42 14.5with Masters 45 15.5with Bachelor’s/Diploma 79 27.2with IAS/IPS/ 17 5.9

unknown 29

Table 6: Universities attended by SENSEX directors in 2006Educated at %Non-elite Indian universities 148 50.3IIT, IIM or IISc 20 6.8US universities 58 19.7UK universities 33 11.2Other European universities 9 3.1Other universities worldwide 13 4.4Both Indian elite and overseas universities 7 2.4Overseas universities 6 2.0Total Known Attendances 294 100.00unknown 25

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