Entrepreneurship, corporate governance and Indian business elites
Dr Ajit Nayak
BristolBusinessSchool
University of the West of England
Frenchay Campus
Coldharbour Lane
Bristol, BS16 1QY
UK
Tel: +44 (0)117 32 83442
Email:
Professor Mairi Maclean
BristolBusinessSchool
University of the West of England
Frenchay Campus
Coldharbour Lane
Bristol, BS16 1QY
UK
Tel: +44 (0) 117 32 83460
Email:
Professor Charles Harvey
StrathclydeBusinessSchool
University of Strathclyde
SirWilliamDuncanBuilding
130 Rottenrow
Glasgow, G4 0GC
Scotland, UK
Tel: +44 (0)141 548 4385
Email:
Professor Robert Chia
University of AberdeenBusinessSchool
EdwardWrightBuilding
Dunbar Street
Aberdeen AB24 3QY
Scotland, UK
Tel: +44-1224-272261
Email:
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 formsembedding 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.
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 beensome 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 nationsthat account for the variety of responses observed with respect to the challenges ofglobalization (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 socialand institutional structures and dispositions, and retain much of their intrinsic integrity in the face of new influences. Differences in themodus operandiof 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, social and environmental targets arguably predates and hence substantially shapes the corporate governance movementin India. Such a concern is locally infused with the notion of ‘trusteeship’; a conceptwidely 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 identityand entrepreneurial dispositions (Kloosterman et al., 2003; Waldinger et al., 1990).
InIndia, we argue, corporate governance and entrepreneurship are deeply entwined with national identity and cultural traditionsand 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 predilectionsof those who sit on corporate boards, examining their kinship ties, friendship networks, and the commonality of membership of educational and other organizationsthat 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 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.
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 conglomerateswith 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), presentsa ‘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, introducingnumerous workerbenefits, 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 (
While Tata may appear to be a special case, its success, Misra argues,has been mirrored by other Indian entrepreneurs, such asSeth 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 companiesinto world leaders in several sectors (including viscose stable fibre, insulators, carbon black and the refinement of palm oil), while Aditya’s son, Kumar Mangalam Birla, united themin 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 nurturethe 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 thepractice 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 (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 atrans-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).
Secondly, the practice approach emphasizes the importance of latent, hidden and unobservable influences in place of manifestactions 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 rationalmeans-endsreasoning. 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 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 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 behaviourfrom 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 transforma seemingly unfavourable situation into a favourable outcome (de Certeau, 1984: 39). Timeliness in intervention is a crucial weapon of such opportunistic interventions.