Is SHE enterprise an oxymoron?

History is replete with examples of when an enlightened business approach did not prevail, but even cynics agree it is worth striving for

In just the last week, China arrested an executive of Japan’s second largest pharmaceutical company, Astellas, on charges of espionage, and news came that EY in the United States is being investigated by the Securities and Exchange Commission for failing to report cheating in the professional exam by its employees. We hear every day, and with increasing frequency, about Icarus-like enterprises, which fly too close to the Sun, like Winsome Diamonds, Kingfisher, SVB, and Credit Suisse. Contemporary surveys suggest that public trust in companies is low, perhaps at a nadir. Is this state inevitable?

I searched Google N-gram for the occurrence of the term “honest enterprise” from 1800 till the present time. The frequency of occurrence of honest enterprise was initially low, suggesting the topic was not prominent. Around 1900 (robber baron years), it shot up to a peak of 328 index. The use of the term, honest enterprise, collapsed thereafter, and is nowadays at a nadir of index 70! Maybe the world now despairs that an honest enterprise is impossible!

SHE stands for three concurrent characteristics of enterprise — sustainable, honest, and enlightened — meaning that you care for your resources, you conduct your business with integrity and you envision the community as the reason to do business. Of course, SHE enterprises show occasional imperfections, because nothing in the world is perfect. SHE enterprise is a high benchmark. It is a worthy ideal to strive for. The “feminisation” through the acronym SHE imparts a degree of humanism into profit-making.

The cynic would argue that honest enterprise is a pipe dream. The idealist would argue that it is tough, but worth striving for. Management writer Alfred Chandler had argued that corporate success is due to efficient organisation structure and scale. He was right, but perhaps Chandler ignored the “softer side” — philosophy, culture, and transmission of values of an organisation. The role of these soft aspects is worth exploring.

In the early days of Indian television reporting in 1987, journalist Rajiv Mehrotra interviewed the legendary JRD Tata. Mr Mehrotra asked JRD whether the Tata group was socialist or capitalist. JRD responded that Tata could well be considered a “socialist capitalist” because those seemingly contradictory ‘isms” define the core philosophy of Tata.

On occasion, I request my audience to vote by a show of hands on two questions. First, are sustainable, honest, enlightened (SHE) enterprises essential for society? The overwhelming majority vote “yes”. Second, can the expressions “sustainable, honest, enlightened” and “enterprise” coexist? Less than half say “yes”.

Here lies a contradiction that the future business leaders must unravel. Surely, the aim of management education and public policy must be to nurture SHE corporations. Many people would agree that SHE enterprise is essential for society, though there are no perfect SHEs. From time immemorial, taxes paid by merchants, along with land revenues, paid for the palaces and public services. Reading the Sangam era classic, Silapathikaram, one learns of the high contributions and status of merchants in the city of Poompuhar. 

In The Enlightened Capitalists, University of Southern California academic James O’Toole, affirms, “Since there could be no human progress without commerce and trade, business-like activities were initial steps towards the creation of early societies.” The sub-title of Professor O’Toole’s book reads “Cautionary Tales of Business Pioneers Who Tried to Do Well by Doing Good.” (Italics mine).

“Tried” suggests that indeed there were pioneers who established enterprises that were based on values during their lifetime. Most companies in his study could not sustain the founder’s values after a couple of generations: Perhaps, like radioactivity, the vitality of the founder’s values decays through its half-life. The narratives in the book are mostly about Anglo-American companies like Unilever, JCPenney, Hershey Chocolates, Johnson & Johnson, and Levi Strauss, all of which prospered at the turn of the 20th century.

As one example, consider the eponymous chocolate company, Hershey. Milton Hershey (1857-1945) may be considered as having done for chocolates what William Lever did for soap. After the initial start, he bought large farmland in Pennsylvania and set up a modern, air-conditioned factory in the late 1800s. He hired architects, landscape designers, and engineers. He set up a model town, much like the Jamshedpur Indians know.

More than the business, the Hershey Industrial School, set up by him in 1915, was his favourite. It offered 12 years of free foster care, clothing, education, and vocational training. He transferred most of his shareholding to a trust benefitting the school without seeking publicity for this charity. Through his life, the company remained highly profitable and stayed private. Hershey acquired an enviable reputation for socially responsible behaviour and was amongst the earliest advocates of sustainability. For a half-century after his death, the company retained the values and principles espoused by founder Milton Hershey.

Around 2002, the first outsider was appointed to run Hershey Foods. Influenced by the changing times and his ecosystem, he saw his job as being to increase company profits; for example, he closed three plants and raised the rates for employees’ health coverage. Unfortunately, at the same time, the trustees entertained a bid to sell their shareholding to Wrigley, but backed off when employees and associates took to the streets. The trustees had used trust money for a golf course and to pay fat commissions to themselves. Later, the trustees entertained a bid from Mondelez for a takeover; anathema to the founder’s principles.

The boardrooms of both the trust and the company had become super-commercial. There was in-fighting. Milton Hershey’s values and enlightened business approach did not prevail.

It is, however, worthwhile to consider examples where the values prevailed.

The writer is an author and a business commentator. www.themindworks.me; rgopal@themindworks.me