Sorry Murthy, Compassionate Capitalism Is So Much Baloney!

by L Subramanyan    Apr 03, 2017


Like my earlier pieces, first the qualifier. NR Narayana Murthy, the founder of Infosys is a man who I admire enormously. He created Infosys, he championed the cause of corporate ethics (except for a few aberrations like making his son his EA) and is generally considered to be a very ethical man himself.

However, sometimes, it is better to call out the Emperor and say it aloud that he is not wearing clothes. And that is why, I think that his concept of ‘Compassionate Capitalism (CC)’ is nonsense – yeah, you read it right, it is Nonsense.

If CC is supposed to mean that a company must be good to its employees – pay them well, treat them right, give them opportunities to grow, instill values in them, lead by example, etc. etc. many companies – Indian and non-Indian, have been doing it and for many years now. Organizations such as IBM, Tata, Birla and of course a few diamond traders in Surat, who have gifted cars to their employees (sic) have done it and done it consistently. The first three mentioned worthies have been doing it for over five decades or more. So no rocket science that.

If on the other hand, CC is meant to cater to people who are outside the periphery of the corporate entity, then the question is – why? And how does that benefit anyone? Including the society.

The third angle, which is probably what Mr. Murthy means is that CC is meant to create a corporate where the compensation is not according to market forces, corporate performance but some as-yet-unidentified yardstick of fairness, which, because of its noble rhetoric and subjective metric, will never get called out because, hey, it is so ‘noble’.

Read more: Did NRN Give Corporate Ethics The Short Shrift?

Companies, especially, ones which are global and public, cannot be run on such principles. Market forces, company’s performance, fixed vs. variable pays and the overall industry’s position in the global market will decide the quantum of increases in pay. And these are fairly objective metrics which are published before the increases are announced. Surely, Mr. Murthy, as a board member was in the know. That said, introducing any other subjective element in the equation is tantamount to subversion of the entire process.

My question to Mr. Murthy is – where was Compassionate Capitalism when Infosys settled a sexual harassment suit against one of its senior managers in the US? The principles of CC would argue that Infosys and its then CEO (Murthy) ought to have allowed the legal process to continue and not settle. Was it not the sheer realization that continued focus of the world on Infosys and sexual harassment issue would dent its image in the market? Or will Murthy argue that he was compassionate to the complainant and capitalistic towards the employee? Whenever Infosys has laid off employees, citing market downtrends, was it still pursuing CC, or was it using the market trends to trim and right skill its workforce?

Compassionate Capitalism sounds great – everybody loves it and to criticize it, is heresy. Look at the amount of press Mr. Murthy has got and look at the adulation that he will get, for his ‘noble stance’, even going against a person he himself had hired.. Wow! The TV anchors will go berserk, and guess what, there could even be a soul or two, who will suggest that he be nominated for the post of President of India, now that Pranabda is leaving this year. On better days, you could even have had an anchor asking that India wants to know why Mr. Murthy cannot be elevated to divinity.

The reality is Mr. Murthy’s CC is probably meant to shock and awe, and not really achieve anything in substance. Sure he will embarrass the board, the CEO, even his own protégé and the subject of his diatribe. In real terms, he knows (at least he ought to) that CC is sheer nonsense – cannot be practiced for a corporate entity’s single goal is to increase shareholder value through means that are legal. If CC means that either one reduces the COO salary (in which case, he can be poached by any other competitor) or increase the salaries of the other lower-rung employees (in which case you will have overpaid lower rung which will reduce the bottom line without adding any commensurate benefit to the company and in addition, have employees who will never leave because no one is anyway going to hire them at the salary that they are getting paid).

One small point, though is that Mr. Murthy says he walked the talk by taking a far lower salary than his peers while he was the CEO. Of course he did. However, I don’t recall, Mr. Murthy, giving away his shares to his lower-rung employees, over and beyond the ESOP scheme. Sure he took a lower salary, but that did not prevent him from enjoying the dividends, the bonus splits and the wealth that he created for himself and his stakeholders. No one grudges him that, so why must he grudge a USD Two million fixed-cum-variable package for the COO of a USD 10 Billion company!

So Mr. Murthy, what do you suggest?

[‎L Subramanyan is Founder & CEO Trivone Digital Services]