BOTTOMLINE: SINCE SEPT 11, STATE’S WITHDRAWAL IS WITHERING AWAY

Terror attacks spawn new corporate governance trends in the West

Sitanshu Swain

What does September 11, the day four planes, hijacked by terrorists, attacked the symbols of US economic and military power by smashing the aircraft into the World Trade Center and Pentagon, have to do with corporate governance? On the face of it, little. But scratch the surface just a bit, and there’s a link.

“Corporate governance globally has changed in a very fundamental way as a direct consequence of the terror attacks in the US,” says UK-based Dr Madhav Mehra, chairman, World Quality Council, and president of the World Council For Corporate Governance.

Says Dr Mehra: “It has changed the basic thinking of multinationals, the way they have been fiercely competitive to gain market share or to meet future competition.”

Secondly, it has fundamentally changed the mode of governance in major capitalist countries, including superpower US, and its staunch ally, the UK, where governments are even busy in making draconian laws putting individual freedom at stake without justifying their stand sufficiently or where the governments are bailing out industry and business, including aviation and businesses providing security to airports.

“The governments of major countries, which everybody thought were giving way to privatisation, are clearly back pushing the social services and security agenda in the aftermath of September 11,” explains Dr Mehra.

“Rather, the phenomenon of state withdrawal is withering away,” he remarks.

Thirdly, for the first time, the stakeholders, in this case the employees, apart from shareholders, are being taken seriously for complying with corporate governance worldwide. In the US, a study has found that respect and recognition for the contribution of employees has facilitated an almost 10-fold hike in productivity.

According to Dr Mehra, the economic value of social benefits and the co-existence of profit and social responsibility, which were earlier mere rhetoric, are turning into realities now.

The basic issue is that the losers in the fierce market competition have to be taken care of anyway, concludes Dr Mehra, the founder of Quality Management International, set up in the UK in 1974 to promote quality management.

“You can no more afford to neglect the losers. There are justifiable and decent ways to accommodate them,” he sums up, adding that the recently concluded Doha summit where India played a leading role in setting the agenda for the new round of trade talks also proves this point beyond any doubt.

As an example of what happened after September 11, Dr Mehra quotes the case of Airbus, which, after losing a massive deal to Boeing, was given the order to supply spare parts for the aircraft deal.

Thus, a collaborative and cooperative competitive atmosphere has been born in the West out of the high risk and uncertain times post September 11. And this is not a temporary phenomenon. The new trend is here to stay, he avers.

In the UK, he says, apart from the fact that Prime Minister Tony Blair has been taking regular lessons in the Koran so that he can explain to the world at large about the terrorist act of misinterpreting the Koran’s teachings, the government machinery has been moving away from the Thatcherite days and is back in the Keynesian mould.

“I find the social responsibility of the governments has gone up and there’s more involvement of the state in the day to day life of the citizens,” he observes.