Transparent leadership is no longer a nice-to-have, it is a survival issue that CEOs and board members ignore at their peril, says leadership guru Ravi Chaudhry
This article was first published in the January 2017 China edition of Accounting and Business magazine.
The fault lines in the global economic framework continue to deepen. The silent majority is frustrated. Those in business refuse to accept that the old assumptions are no longer valid and continue to lobby and influence policymaking, with scant regard for the perennial problems of the masses. Barring a handful of notable exceptions, the custodians of corporate governance – boards of directors, top management, regulators, bankers and auditors – are facing an unprecedented deficit of public trust.
The process of restoring trust rests entirely with the CEO and the board of directors of a company. It’s a responsibility that can’t be wished away, nor delegated.
CSR to SRC
I perceive this as a challenge to take the step forward from CSR to SRC: from the mere cosmetics of corporate social responsibility (CSR) to the transparency of a socially responsible corporation (SRC) in everything that the company does. CSR is a mechanical process, while SRCs evolve a new DNA that percolates all through the organisation and lodges itself as a non-negotiable corporate characteristic.
I say this because I sense the evolution of a new phase of human enterprise, one that is redefining the criteria of success as well as recontouring the routes to success. There have been four phases up to now:
- Phase one: strong fish eating weak fish. This was the law of preservation till the early days of industrialisation. The Romans, Turks, British and French all followed this path of ruthless domination.
- Phase two: big fish eating small fish. This started with the concept of the joint stock company. The British East India Company, set up in 1600, created an ingenious financing model, while lowering risk and giving birth to the business-politics nexus and ‘crony capitalism’.
As far back as 1876, in the year that he was elected US president, Rutherford Hayes declared: ‘This is a government of the people, by the people and for the people no longer. It is a government of the corporations, by the corporations, and for the corporations.’ Since Rutherford’s declaration, things have become much worse all over the world.
- Phase three: fast fish eating slow fish. This phase was prompted by the death of distance and the birth of the internet. Apple was incorporated in 1977, Microsoft in 1981 and Google in 1998.
- Phase four: intelligent fish eating dumb fish. This is when, in the early 21st century, we witnessed the dominance of a new kind of corporation: the Indian trio of TCS, Infosys and Wipro; Embraer in Brazil; Haier in China; and Samsung in South Korea. Many others also discovered a new dawn.
The transition to a new phase has often been the trigger for corporate failure. Those companies that prevail have an eclectic mix of traits: they are strong, they are big (in substance), they are fast (in responses), and invariably they are intelligent. The defining moment in the beginning of each new phase is the inevitable need to imbibe the new trait.
An analysis of this process identifies the early signs of the corporate world entering a new phase:
- Phase five: realistic fish eating unrealistic fish. This is driven by two powerful societal expectations: greater social consciousness and an unyielding respect for nature and environment.
Leaders who are realistic enough to acknowledge the new realism will emerge as winners in the 21st century. This is not philanthropic talk. Business leaders don’t have a choice: they have to acquire the new trait of realism, whether willingly or grudgingly. A company that makes only money will be considered a poor company hereafter.
Potent forces are driving the emergence of phase five, stemming from the rise of a knowledge-led civil society, and the predominance of youth in demographics, based on the premise that ‘another world is possible’.
Many of us hoped that corporate scandals such as Enron, Worldcom, Tyco and Satyam in the early years of this century would act as decisive catalysts to promote responsible corporate leadership. It was not to be: soon after those accounting scandals came the long-lasting shocks of the financial sector misdemeanours in 2008.
Yet no lessons were learnt, and corporate misdeeds continued. The Olympus accounting fraud (2011), Libor rigging scandal (2012), Petrobras (2013), Fifa indictments (2015), Toshiba accounting scam (2015) and the Volkswagen emissions scandal (2015) have shaken up people’s faith in corporate integrity.
The prerequisites for anyone who is already a CEO, or aspires to be one, are ‘base camp leadership traits’, which fall into two domains:
1. Strengths within (physical traits):
- basic intelligence
- energy and drive
- professional will.
2. Interface with the outside world (mind traits):
- pragmatic vision – to foresee opportunities
- transactional skills – to build teams and motivate
- perseverance – to overcome obstacles.
Leaders wanting to survive in a world characterised by volatility, uncertainty, complexity and ambiguity (VUCA) need a new set of leadership traits, those of conscience, pertaining to the heart of the leader. These traits do not call on leaders to change their hearts, but to discover their hearts. The ‘tripod of exceptional leadership’ has three strong pillars: wholeness, compassion and transparency.
Wholeness is the defining trait. Typically, a decision-maker is satisfied if they can get a complete 360-degree view. They forget that this view is only from the perceiver’s vantage point.
Each of our actions has an impact on others – directly or indirectly. The ‘whole wholeness’ comes when we take an additional 360-degree view, as perceived by others. Wholeness is a 720-degree view.
A 360-degree view excludes, while a 720-degree view includes those who are excluded. Coupled with compassion, it allows corporate leaders to reconcile irreconcilables and achieve profits with conscience, growth with equity and compatibility with nature.
When leaders pursue this journey, they discover another pleasant surprise – a ‘triple top line of joy, peace and contentment’. Not only for them, but also in the personal lives of people all around. When that happens, the company can be fully transparent in all its actions and public interactions.
In conclusion, a leader has to start listening to their conscience, yet always remember that, as the writer Madame de Staël, said: ‘The voice of conscience is so delicate that it is easy to stifle it; but it is also so clear that it is impossible to mistake it.’
Ravi Chaudhry is the founder chairman of CeNext Consulting & Investment, New Delhi, India. Prior to that, he was chairman of four companies in Tata Group, India. He is the author of Quest for Exceptional Leadership: Mirage to Reality
"A company that makes only money will be considered a poor company hereafter"