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This question is of major importance in the context of modern industrial civilisation. It has been studied from very many points of view, economic, managerial,
anthropological and ethical. Since the underlying issues are essentially social, they figured in different ways also in pre-industrial societies. Historical and legal analyses of the issues involved may be found in
the early and late medieval, and even ancient periods.
To philosophers, the question appears primarily in terms of the desirable relationship between an individual and the corporate structure. The perceived
risk is that an individual's participation in a corporate or group structure is likely to impair the individual's well-being. Yet analysis reveals that every individual, almost right from the time of his birth,
certainly from the time of his adulthood, consciously or unconsciously, belongs to multiple groups family, local community, professional union etc.
But one must take note of the special nature of the corporate bodies which are voluntarily brought about by a group of persons in pursuit of a commonly
defined goal. Within the legally created corporation, the roles of the persons concerned may be common at a very general level, but different at functional levels. The founders of the corporation are admittedly its
owners to the extent that they invested their money or productive capacity, or both, into it. The market value of the stock held by them determines the extent of their ownership, not necessarily control, of the
joint-stock company. The difference between ownership and control did not come up in a big way until corporations grew in size and complexity requiring special managerial skills and competence.
Most of the corporate bodies in earlier days used to be exclusively owned as well as managed by the founders. Later on when the size and nature of the
operations of the corporations became very large and complex, demanding high capital investment, these had to be opened up to the public for capital participation. The British East India Company and the Dutch East
India Company are among the earliest corporations of modern times. The understandably complex nature of their political and economic activities called for supervision by the states concerned. Later on it was felt
that mere supervision would not do, and that active participation, if not effective control, was a functional imperative. For example, in the case of India after the Sepoy Mutiny, or what is often designated as the
First Freedom Movement, the British Crown took effective control of the territories administered by the East India Company.
Whether the government's intervention in the activities of corporations is desirable or not remains highly controversial. Some economists of the laissez-faire persuasion are of the view that since government is a temporary and impersonal entity, the effects of its intervention on the policies of the corporation are likely to be scrappy, lacking in depth and more or less harmful not only for the owners or holders of stock but also for consumers and workers. In the heyday of capitalism, as we know, the workers used to be treated as commodities and consumers' interests mattered to the capitalist only in terms of profit maximisation. Later on with the expansion of industry and of the labour force, and the formation of trade unions and consumer groups, it was felt that the interest of a large section of society had to be kept in view by the capitalists in their own interest. Increasing strength of the left-leaning political parties insisted on state intervention in the operation of the market forces, at least in critical areas, and when the public interest was under threat from the defenders of laissez-faire.
The pre-Marxist socialists like Robert Owen (1771-1858) and France Cabot Lowell (1774-1817) expressed their views favouring workers' interests and
welfare, pertaining particularly to health, housing and security. Many writers of the time portrayed a grim picture of the living conditions of the industrial workers. Some capitalists like Henry Ford and George
Pullman initiated measures for workers' welfare, raising their wages and reducing their working hours. Many companies started setting up townships for their own employees. From the start, a section of industrialists
and industrial psychologists disapproved of this welfareist approach to industrial production. They thought, following Malthus, that social welfare measures for the workers beyond a certain point adversely affected
industrial production.
By the end of the last century the socialist view favouring increased public interaction and community services of corporations gained general
acceptance. In many cases the management of corporations started extending support to local government, educational and medical institutions. The days of estrangement between industrial production and community
needs came to an end. This general position was not uniformly prevalent everywhere. There were dark spots, particularly in those countries where the management of corporations was still vested in the unfettered
hands of owners.
For example, in the late nineteenth century the living conditions of the jute workers in Bengal and the textile workers in Maharashtra and Gujarat were
extremely miserable. These industries, established in the second half of the nineteenth century, were privately owned and the owners had little or no concern for the living conditions of the workers. The trade union
movement in India was still in its infancy. In many areas it did not exist at all. Gandhi's support to the strike of the textile workers at Ahmedabad (1918) drew the attention of the public in the country and roused
their conscience against exploitation. It was around this time that Gandhi started developing his concept of trusteeship. Industrialists, according to him, were not really owners of the industries concerned; they
were but holder and managers in the sense of trustees. Of course this non-violent revolutionary concept of corporate life did not find a ready acceptance within the industrial community of the time.
In highly industrialised countries, most corporations are managed professionally, and an important distinction is drawn between the role of manager and
that of entrepreneur. The entrepreneur, someone who commits both his time and his wealth to the enterprise he creates or helps to create, is different in style from the capitalist owner who provides finance
separately from management and day-to-day involvement. Thus the entrepreneur is expected to mobilise and co-ordinate the different factors of production – land, labour, and capital.
In the area of management Max Weber introduced the idea of 'bureaucracy'. To him 'bureaucratic management' is a descriptive, not a pejorative,
expression. By bureaucracy he means a hierarchical structure consisting of well-defined functional positions based on specialisation and division of labour. The persons who occupy these positions are supposed to
interpret and apply the rules of the concerned corporation.
Later on, some anthropologists pointed out that the 'value-neutral' concept of industrial bureaucracy is flawed, for, in practice, it is found to be
similar to state bureaucracy, impersonal and relatively unresponsive to the changing needs entailed by the interests of the shareholders and customers. In the larger interest of the different groups involved in the
process of industrial production, it has been felt that public relations, market promotion, and research and development are all basic functional inputs. Interaction between the groups responsible for these
activities needs to be continuously monitored and improved. The management gurus maintain that the success of corporations largely depends upon the quality of these interactions and not so much on the
bureaucratic structure.
By the second half of this century in Europe and America, corporations were co-sharing social responsibility with the state. They provided employment
to the products of leading business schools, to both white - collar staff and blue collar-workers. Additionally, immigrants from Third World countries, technically qualified executives and unskilled workers, were
also being provided job opportunities. Because of the fast growth of industry and related post-War activities, some people achieved earnings and skills in new areas of learning which otherwise they could have not
expected. At the same time, the cost of immigrants workers was relatively cheap in comparison with local labour.
The situation in the developing countries like India was understandably different from that obtaining in the West. Because of the oil boom in the Gulf
countries, many south Asians, both at the senior level and at the workers' level, rushed to avail themselves of the job opportunities there. Their services were also solicited in view of the non-availability of
local human resources in adequate numbers. A new situation also developed. While the ownership of the oil fields remained with the states of the region, the technical responsibilities and management at the higher
levels went to the giant corporations from Europe and the United States. A considerable amount of oil money went out of the region but whatever remained within the region did not necessarily reach the lower strata
of society. Rapid industrialisation in a particular sector did not bring about the necessary welfare for the people at large. On the contrary, these non-renewable resources are getting fast depleted because of
over-exploitation.
In India, the role of corporations started changing after Independence, when many European companies, particularly the so-called 'Managing Agencies',
started withdrawing from the scene, off-loading their shares to Indian capitalists. It is true that some of these companies retained substantial equity holdings even after relinquishing their management
responsibilities. In the process, they thought, they could disengage themselves from the effects of changing politics while ensuring receipt of profits from their holdings in the old companies. Consequently, a new
class of ownership, together with a new class of managers, started gradually emerging. In response to the growing demands for new managerial talents, some management schools, following the models of leading American
business schools, were established on the initiative of the Government. These were followed by a large number of privately-owned management schools.
Also, a number of IITs (Indian Institutes of Technology) were set up in different parts of the country. These were modelled after the MIT in Cambridge,
Massachusetts, combining technological courses with some courses of humanities. Unfortunately, a large number of the products of IITs and management schools, after receiving their high-priced education, started
going overseas in search of lucrative jobs and research opportunities. This is in effect a form of reverse transfer of resources.
In the wake of the new spurt in industrialisation, particularly in the private sector, a large number of young people have new opportunities
unimaginable in the 30's and 40's in India. Also with industrialisation, the Trade Union Movement grew in scope and stronger in its bargaining capacity. The dominant role of Government in the capital-intensive core
section left the labour-intensive industries by and large to the private sector. The external control exercised by governmental bureaucracy interfered with the autonomy and professionalism of the public sector
units. In the name of protecting the interests of the workers and employees, most of the left-leaning trade unions, affiliated to different political parties and undertook heavily politicised industrial activities.
Low productivity, frequent strikes and stoppages adversely affected crucial enterprises in the public sector, like power, banking and insurance. All state-owned electricity boards, from the strictly audit point of
view, turned out to be bankrupt. State-owned banking and insurance proved to be relatively inefficient. In brief, public investment in almost all non-monopoly sectors was found to be increasingly unprofitable. The
spreading malaise crippled many industries. Naturally this development adversely affected all concerned: Government, financial institutions, the job market, workers and employees, and the people themselves. The
failure of the 'socialist' experiment in the crucial public sectors became so evident by the early 80's that an in-depth review of the Government's industrial policy of 1956 became essential.
The recent emphasis on liberalisation, which in fact is a step towards globalization, is exposing sheltered national corporations or public sector
companies to increasing competition. The days of protectionism seems to be passing away fast. When unequal corporations subject to uneven laws are exposed to equal competition, an element of discrimination silently enters into the picture. Often this disturbing development is sought to be justified in the name of 'fair competition'. The economists of the Gandhian persuasion, who are opposed to the idea of opening up small-scale village industries to the force of market competition dominated by large scale industries, are strongly critical of the intrusive presence of international giant corporations in the national economy. Their criticism and opposition rest mainly on two premises, viz., (1) large corporations backed up by massive resources and publicity, are bound to cause labour displacement and (2) the production technologies used by these corporations are indifferent to the problems of pollution. Another consideration that weighs on their minds is also very important: large corporations mean bureaucratic management and that tends to make the work environment dull, mechanical and uninteresting. Everything in course of time tends to become routine and cheerless.
Apart from this personal (or should we say 'impersonal'?) aspect of corporate life, the fallout of the tendency to go for the latest technology has its
own serious drawbacks. While the advertisers and sellers of the "latest technology" highlight their cost-effective character, analysis reveals that the utility and efficiency of most of these technologies
are short-lived, requiring frequent repair and replacement.
In view of the above considerations one has to be very careful before pronouncing one's opinions on the size, personnel management and technology of
the big corporations in the context of developing countries. The question may be raised: how do we then compare the character of corporations from a cross-cultural point of view? What are the parameters to be borne
in mind?
For the sake of simplicity we may refer at least to four parameters:
- the social structure of the concerned country,
- the schedule of values of the people,
- the quality and structure of interpersonal relationships and
- the distribution of rewards and penalties, promotional opportunities or threat of stagnation, dismissal etc.
The social structure of India is relatively rigid, despite its transitional stage, from an agricultural society to an industrial one. An agricultural
society is marked by workers' fixed location in their place of origin. Besides, society in India is hierarchical both economically and by caste. These two factors, taken together, account for the low mobility of
personnel, particularly of the labour force, from one part of the country to another. For example, very few workers would be willing to go from Bengal or Assam to Maharashtra or Gujarat and work there, even if they
were informed of the relatively better work environment.
However, this point is not to be taken in an absolute sense, because with the advent of industrial civilisation increasing mobility is evident not only
at the managerial levels but also at the lower levels. In our hierarchical society, employees of different levels, so-called 'high' and 'low', are not generally found to be psychologically inclined to discuss their
problems face-to-face. The mediation of union is often necessary. This tends the weaken the personal relation between different levels of employees and workers in a corporation.
The value system of society in India is such that the principal dignity of labour, even in the context of the upcoming industrial culture, is yet to be
fully accented. Moderately educated persons are generally disinclined to be taken on as workers' or at relatively 'low' level, even if they are aware of the latent opportunities to move upward quickly. For example,
graduates of arts, commerce, or science without specialised experience will not readily agree to undergo rigorous training for 4-5 years in any specialised branch, managerial, secretarial or technological, so that,
after the completion of the training, they could be placed at a higher level. The social value system is such that they seek a very 'respectable' entry point.
In the industrialised West there are many types of manual work where the wage structure is very attractive. For example, the window-cleaner of a
high-rise building or the heavy-duty truck driver earns more than an ordinary graduate. In the Indian context it would be difficult to get a graduate who would be willing to be a window-cleaner or truck driver. The
concept of so-called ijjat, respectability, blinds the job seeker's vision of a professional career. This is also rooted in the hierarchical structure of the society and its relative vertical immobility.
Nevertheless, things are slowly changing.
Compared to the corporate behaviour of employees in Europe and America, we find that Indians are less individualistic. While the former think primarily
of themselves, their job opportunities, professional promotions and the like, their counterparts in India are more or less attached to their familiar or familial environment, security considerations and ethnic
milieu. These traits of behaviour are also traceable to the pre-industrial social culture. For example, even upon promotion, many Indians will not readily agree to go to a distant and (what they would call) strange
work environment. The spirit of competition and possessive individualism is yet to be strongly felt in the corporate life of the country.
In the mind of the people of developing countries, the image of the large corporations of developed countries is invariably mixed up with political
considerations. In particular, people in countries with a colonial background think that the large corporations of the industrialised countries are a business proxy of their hegemonic intention. What imperial
generals used to do in the old days of colonial rule is now being done, of course in a disguised way, by the mighty directors of multinational corporations (MNCs). Their new theatre of operations is the board room.
The company laws of many developing countries are framed so that the controlling shares of the core industries should not be in the hands of large foreign corporations. In the 50s and 60s of the century, against the
backdrop of the freedom from colonialism, the leaders of the Afro-Asian countries used to view the foreign presence in the business field with considerable mental reservations. The simple fact that these Third World
countries did not have enough capital of their own gradually obliged them to accept or invite foreign investment. Then in the matter of profit remittance, as in the matter of equity participation, considerable
restrictions were imposed. With the passage of years this restrictive attitude vis-à-vis the foreign corporations is being relaxed. To meet this local scepticism towards them the large corporations pay attention to public relations (PR) activities, cultivate influential leaders and spend considerable funds for known business, particularly welfare, activities. In the developing world the countries with socialist leanings, and those that are yet to be capitalist in the received sense, are sceptical, if not critical, in their attitude to the activities of the MNCs even of local origin. Rightly or wrongly, the widespread public belief is that most corporations are committed to the principle of profit-maximisation and are indifferent to consumers' interest. If the life of capital and other factors of production, particularly labour, are viewed from a long-term perspective, the principle of profit maximisation assumes a new character. Close scrutiny shows that the returns from capital increases if this factor is suitably related to other factors and the related interests.
In the age of industrial democracy corporations are expected to share their profits with their widely present but invisible owners, i.e. the
shareholders. The latter, in their turn, are required to be more actively interested in the policies and activities of the corporations. The concept of 'limited liability' must not lull them into total inactivity,
leaving everything to the clever members of the boardroom. When profit-sharing is equitable and encouraging, the companies concerned benefit and grow faster. By ensuring quality control, corporations can enlarge the
circle of customers. Even if profit per unit of product goes down, corporations do not lose even in a competitive market, provided their goodwill and credibility in relation to the customer stands. Workers' and
employees' participation in the equity holding of corporations further strengthen their market standing and, ultimately, profitability.
Thus one finds that in the case of rightly managed corporations, the interests of the owners, managers, employees and the public at large can be reconciled not only in principle but also in practice.
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