Family firms: Preordained to be governed by passion and purpose

This article was first published in moneycontrol.com, March 29, 2022, Co-authors: Sougata Ray & Navneet Bhatnagar; https://www.moneycontrol.com/news/business/family-firms-preordained-to-be-governed-by-passion-and-purpose-8283921.html 

In the face of the challenge posed by phenomena such as global warming, climate change, poverty and inequality, and rapid depletion of natural resources, calls have grown louder for putting stakeholder capitalism over shareholder capitalism that has been practiced by companies for ages.

Social and political unrest in many countries, increased frequency of natural disasters, and finally the COVID-19 pandemic have laid bare the fault lines on which the global economic order rests and vulnerabilities of modern societies.

These developments reinforce the urgent need for companies to widen their canvas of responsibility, do more good, and do good for more constituents by embracing the sustainable development goals (SDGs) of the United Nations.

Corporations and family businesses in India, and elsewhere, have little choice but to shift their focus from only increasing profit to balancing profit with increasing net positive impact on the Environment, Society, and Governance (ESG), marrying profit with purpose.

Corporate governance under shareholder capitalism has traditionally been mandated and designed for maximizing shareholders’ wealth and minimizing agency costs.

Empathy, sensitivity, perseverance and adaptability have, however, emerged in recent years as key traits that board members individually and the board collectively must possess to govern a company from a multi-stakeholder point of view.

Interestingly, these are called feminine traits because women across cultures are found to possess these qualities more than men. Greater presence and participation of women is more likely help a board to discharge its mandate in the new paradigm more effectively.

Reducing inequality and discrimination has also been one of the most formidable social challenges, of which gender is the most pervasive one. Greater gender inclusivity and diversity in every level of corporate hierarchy is going to be a source of competitive advantage for some time before it becomes sine qua non for modern corporations.

In her article for the inaugural issue of the Family Enterprise Quarterly, Dr. Sangita Reddy, joint managing director of Apollo Hospitals, put it eloquently: “In today’s hypercompetitive marketplace, gender diversity is good business.”

How well are family businesses in India positioned in the emerging environment?

Our research at the Thomas Schmidheiny Centre for Family Enterprise, ISB, reveals that family businesses listed on the National Stock Exchange of India showed a greater propensity to comply with the mandate of the Companies Act, 2013, that certain public companies must appoint at least one woman-director on their boards. This demonstrates the resolve of family-run companies to embrace and adapt to changing regulatory requirements.

The identity and image of the family is closely tied to the functioning of the family business. We observe that family firms in India, on average, have a greater than 50 percent stake in their firms, making them personally invested in the reputation of the business, its longevity, and image as a socially responsible, sustainable contributor to society. The ownership control enables them to influence decisions and reorient the board-level discourse towards better outcomes for all stakeholders.

Our research also shows that women directors in family firms are mostly executives. And a family member is at the helm of affairs at more than 90 percent of such firms. The combined effect of these two factors provides business families the management control to implement required changes at the strategy and operational level to adopt ESG-friendly practices.

Demographic changes in business families and at the societal level in India, in recent years, have nudged many family-run companies to adapt, discard primogeniture, promote gender equality and evolve with time to be a responsible corporation.

The enterprising one have defied “from shirtsleeves to shirtsleeves in three generations” while the others have fallen to the adage. It is time more family firms understand that what is good for the society is good for business, and, therefore, good for them too!

Firms founded by enterprising business families are preordained and wired to be long-term-oriented, driven by values, and led by passion and purpose. In an era dominated by shareholder capitalism, family firms, being more patient and not driven by quarter-on-quarter results, were significantly disadvantaged compared to other companies barring state-owned enterprises.

As the world of business swings towards stakeholder capitalism by incorporating an ESG framework, family businesses in India and elsewhere have the opportunity to leverage corporate governance as a competitive advantage. It is time for them to recognize this and seize the momentous opportunity.

Give Her Wings to Fly

This article was first published in the Times of India, March 08, 2022

Men are from Mars. Women are from Venus. There is no denying the differences.

There are obvious differences in size and anatomy. They did matter when it was required that people went hunting to provide food for their families. It also mattered, and still matters, when hard labour or physical strength was/is required. But does the physical strength matter so much when most of the work is automated, digitized, and brain power has become more important than muscle power in most of the industries?

Psychological differences also exist. Research has consistently shown that women are more emotional, sensitive, anxious, and friendlier. Men are more assertive and open to new ideas. This has been found to be true across cultures, indicating that the difference is biological rather than cultural.

There have been women who transcended all biases, disadvantages, and segued into territories reserved for men. This article is about the norm. The norm is that the Gender Inequality Index shows vast inequality between men and women. That many governments and organizations such as the UN are taking steps to bring about gender equality. As a result, we have come far from where we were a few decades ago. Yet, we are far from equality. Change is happening. It’s just not happening at the speed we want it to. Why?

Mindset: We have come a long way from the days when most girls did not go to school and formal school education for girls was a rarity rather than a norm. The male-female literacy gap has consistently reduced from a peak of 26.62 per cent in 1981 to 16.68 per cent in 2011. The Census 2021 data is awaited but this gap is expected to have reduced further due to the enactment of the Right to Education Act in 2009, ongoing efforts for hygiene, separate toilets for girls, and slowly yet steadily changing cultural and societal norms. A good education is the steppingstone to a good career. It gives one the foundation to think creatively and the confidence to charge ahead.

Consequently, women are charging ahead. Though, the gap remains huge. Many corporations are now starting to recognize the gap, acknowledge it, talk about it, and pledge to narrow it. For example, HDFC Bank published data on representation of women at different levels of management in their annual report and set a target for improvement.

All the above are welcome improvements. But there are biases that keep many girls from pursuing an aggressive career. Statements such as, “your place is at home”, “you must come back home by 7pm”, “you must not travel”, impede growth at work and prevent women from utilising their full potential. These are not things people would say to a man.

It is time the society realises that women are not a subset of men. They are their own identities and have their own aspirations. Don’t weigh us down by biases, expectations, and preconceived notions of what is appropriate for us to do.

Mental Load: It is a known fact that women take on greater burden of household chores. Increasing levels of education, awareness, and changing demography has also resulted in larger percent of women in managerial and senior management roles. The gradual shift in mindset has made households more open to seeking external help for chores, outsourcing day care of children, and technology is aiding in reducing time taken to do many chores. Though none of this can be generalized, there is certainly a positive shift in general.

Yet, the percent of women that reach the top management teams in organizations remains dismal. Why? Even though many of us manage to keep afloat when at relatively junior levels in the organization, at senior levels of management, it becomes difficult to balance the requirements of the job along with the expectations at home. Our hands are freer. Our minds remain cluttered. Our load has changed its form, like energy. We may not be doing a lot of work on our own, but we need to get it done. At senior management levels also, most of the work entails getting work done, guiding, and crisis management. Women do that at work, and also at home.

The challenge is that it is difficult to explain mental load. I get asked many times, “what do you do at home? You have help for everything. What challenges?” At other times we are told to simply “ask for help”. The assumption when we are told to ask for help is that we are responsible for that task, not our partner. So, the burden of getting something done remains with the woman.

Another challenge is that we women ourselves have grown up seeing our mothers do more physical work at home, be physically present, and a “Mother India” image of being an ideal parent. This notion leaves us in a shroud of guilt for not being a “good parent”, for having fun, for not sacrificing enough, and for being ambitious. This leads us to greater anxiety, worrying, trying to compensate in different ways, and generally, unhappy.

Men: I asked a few male friends to read Indira Nooyi’s book, “My Life in Full.” None of them said No. But to the best of my knowledge, none of them did. On the other hand, many of them did read Harsh Mariwala’s Harsh Realities. Why? This is a loaded question and points to the unconscious bias that exists in the minds of men, as well as women.

Discounting women and their achievements is the biggest disservice that men, and even women, inflict on women. When men succeed, and their career is their only job, most of the times, it is due to their skills. When women succeed, despite taking on unreasonable share of household responsibilities, it is “because” they have a supportive husband. Family support is a must to be able to work uninhibitedly, for men, as well as for women. Most husbands who help their wives at home make it sound as though they are doing a favor to their wife. They are not. The house and the household belong to the men as well and so must its responsibilities.

While many of us try and create an external support system of creches and daycares and nannies, it only helps us do a 9 to 6 job. Not beyond that.

Last Word: To bring about any meaningful change and achieve true gender equality, mindset must change at the societal as well as individual level, mental load should be acknowledged and shared, and men must equally involve in bringing about change rather than treating it as a “women’s issue”.

Educating a girl child is like giving her wings. But then not supporting her to give her best, is like not giving her the sky to fly, despite the wings.