Evidence of Corporate Governance from Arthasasthra

 

Kautilya also known as Chanakya was the chief adviser and one of the significant ministers for a very powerful Emperor Chandragupta Maurya, the first ruler of Mauryan empire. Kautilya is believed to be instrumental in finishing the Nanda Empire in Magadha. He helped establish the Maurya empire which is believed to be larger than the Mughal empire and even British empire in India (Singh, 2016). Arthasharta was written by Kautilya as a guide for those who govern and deal with economics and politics. In the text the great master discusses three important aspects namely national security, administration of justice and economic growth policies. It is clearly evident that although the text was written for King Chandragupta Maurya but the author had acknowledged in its introduction that it has been written as a rulebook for “those who govern” or in simple words for decision makers.

The Arthashastra, ought to be read by all, be they statesman, business managers or academic scholars. Arthashastra when translated means “knowledge of wealth” or “wealth of knowledge

Kautilya’s Arthashastra is written in Samskrit, contains 15 books, 150 chapters with 6000 sutras (shlokas)and Covers over 180 topics. It is known as a Book  of Economics, State craft, Management, Warfare,  Strategy etc, and is considered as  a book of  ‘Total Management’

Vishugupta-Kautilya-Chanakya (370-283 BCE) was a teacher in Taksasila, an ancient centre of learning, and was responsible for the creation of Mauryan empire the first of its kind on the Indian subcontinent. He was born in 3rd century B.C. He is responsible for pulling down the Nada Dynasty ; He was the king maker during tenure of  Chandragupta Maurya ; Responsible for the retreat of Alexander the Great from India .Arthashastra and Neetishastra were documented towards the end of his life

Kautilya's Arthashastra maintains that for good governance, all administrators, including the king were considered servants of the people. Good governance and stability were completely linked.

”. According to Kautilya‘s Arthasastra, the Hindu way of life reveals four main aims (1) Dharma (2) Artha (3) Kama and (4) Moksha. Artha refers to material progress which is required in order to live a balanced life. Arthasastra‘s main part deals with National Security, Foreign Policy, Administration of Justice, Economic Development Policy, Taxation, Labor Management and Financial Management. Kautilya describes the rules to prevent the misuse the power.

The substitution of State with Corporation, the Council of Advisors of the King with the Board of Directors, the King with CEO and the subjects with the shareholders bring out similarity in CG structures.

 Central to the concept of CG is that publicgood should be ahead of private good and that the corporation’s resources cannot be used for personal benefit.

Kautilya’s philosophy is based on the principles of “sam, dam, dand, bhed” (persuasion, temptation, punishment, and division) as various different and sequential means to achieve an end.

Kautilya used the word ‘dharma’ (which in general, means ‘duty’) and righteousness in personal and social conduct. He described the basic ethical valuesas, “Duties common to all – ahimsa (abstaining from injury to all living creatures); Satya (truthfulness); cleanliness; freedom from malice; compassion and tolerance.

 

The seven dimensions of Corporate Governance identified in Arthasasthra are

•      Conduct of the King

•      Administering Justice

•      Judicial Fairness

•      Measures against Misappropriation of State Funds

•      Concept of Punishment

•      Identification and Prevention of Corrupt Practices

•      Strict Code of Conduct

The structure Arthasasthra has put forward for Corporate Governance has following systems, procedures with  roles specified.

•      SWAMI – THE KING (THE LEADER)

•      AMATYA – THE MINISTER (THE MANAGER)

•      JANAPADA – THE COUNTRY (YOUR MARKET)

•      DURG – THE FORTIFIED CITY (HEAD OFFICE)

•      KOSHA – THE TREASURY (FINANCE)

•      DANDA – THE ARMY (YOUR TEAM)

•      MITRA – THE ALLY (FRIEND/CONSULTANT)

 

The Arthashastra by Kautiliya focuses on running the empire/state efficiently and covers all the aspects of administration and governance. It stresses that a ruler or king (in organizational context CEO) should not care about his own self interest but rather but work towards the happiness and well being of all the people of his kingdom i.e. Bahujana sukhaya bahujana hitayacha (stake holders of organization). The king should find happiness in the happiness of his people i.e. Praja Sukhe Sukham Rajy) and similarly the CEO and management should work towards maximization of shareholders wealth and welfare of all stakeholders

To the specific roles of “Swami”- the King or leader  and “ Amatya “ - the Minister or Manager, Arthasasthra always wanted them to ask themselves three questions:

Why am I doing it ?

What the results might be ? and

Will I be successful?

Only when you think deeply & find satisfactory answers to these questions , should proceed with the performing the task.

“In the happiness of the subjects lies the benefit of the king and in what is beneficial to king and in what is beneficial to the subjects is his own benefit – (1.19.34)

 

Chanakya defines Janapada as your market and Durg , the fort, as your Head Office. In this respect his advice is “once you start working on something, don’t be afraid of failures, and don’t abandon it. People who work sincerely are the happiest”.

His mode of Corporate Governance equivalent has four dimensions: ‘Raksha’, ‘Vridhi’,‘Palana’ and ‘Yogaskhema’ .

Kautilya write that there are three prime responsibilities of a king viz. raksha, palan and yogakshma (Muniapan, 2008) which mean security of people, sustainability/growth and welfare of people. This is very much aligned to today's corporate world where an organization need to look after the security, growth and welfare of its employees and other people who are part of its ecosystem. Arthashastra says that only a king with strength and wealth can protect the interest of its subjects and similarly a financially strong firm with good profits can only think about and in practice protect the interest of its stakeholders.

 ‘Raksha’ literally mean Protection; This can be equated to Risk management aspects in today’s Corporate Governance

‘Vrudhi’ refers to Growth which is similar to Stakeholders Value enhancement

“Palana’ is about maintenance equated with Compliance in letter and spirit according to the modern Corporate governance environment

‘Yogaskhemam’ stands for social security, the counterpart of Corporate Social Responsibility

Kautilya said the ruler must aim to conquer other territories and ensure Yogakshemaand Lokasamgraha of his subjects. Yogakshema means to ensure welfare of the state and subjects implying happiness, prosperity, peace and bliss of his people so as to achieve Lokasamgraha which means to do what is beneficial to people. Kautilya regarded economic activity as the driving force behind the functioning of any political system. He stressed on a well-managed revenue system. Kautilya was a true statesman for whom, good governance was paramount. He suggested built-in checks and balances in systems and procedures for the containment of malpractices.

 

Good governance in Kautilya’s literature is aimed at fulfilling the welfare of the people. “In the happiness of the King’s subjects lies his happiness, in their welfare, his welfare.

The jargon related to Human Resource Management was not prevalent then, but its essence was widely practiced in Kautilya’s times. The King must look to the bodily comforts of his servants by providing such emoluments as can infuse in them the spirit of enthusiasm to work. He should not violate the course of righteousness and wealth. Thus, he shall not only maintain his servants, but also increase their subsistence and wages in consideration of their learning and work.

Kautilya said that good governance and stability go hand in hand. According to him, there is stability if rulers are responsive, accountable, removable, and recallable, otherwise there would be instability.

Kautilya’s Arthashastra identified the significance of training and learning. It clearly stated that training imparted discipline. Kautilya stated that investment in human capital especially in higher education would have a greater impact on the growth and development of the economy. In his own words, “education is the best friend. An educated person is respected everywhere . Education beats beauty and the youth.”

The Arthashastra lays emphasis on the training, learning and discipline of king. Even the learning and training of crown price has been greatly emphasized in Arthashastra. This has been stressed so that the prince is able to gain the necessary skills that are required to become a good king whenever the time comes. The prince was supposed to take Veda education from gurus, had to practice celibacy till 16 years and devote most of their time in education and skill development. This concept is very much aligned to the idea of training which is given to junior employees so that they gain the skills required for higher positions.

Provedand applied management of Chanakya during the Maurya Dynasty is historicallyevident as the best ever management practices India followed. Arthasastra and Chanakya Sutras are the two gospels of Indian management, enough to establish the Indian management system for the modern corporate world of 21^st century.

Kautilya teaches that the internal enemies should be conquered first in order to be successful. The internal enemies in an organization are those managers who are not working towards benefit of the organization but are pursuing their own goals. To keep a tab on such managers by putting proper check practices is termed as corporate governance in the modern world.

The relevance of Kautilya's framework is that it offers a scaffold for the practice of value based management. Arthashastra uniquely defines that this value based framework is an elevated order of an organization. This is further explained in terms of YOGA[1]KSHEMAalso known as social interests leading to the foundation of the value based management framework. Social progress, development and welfare are the principals based on which an organization strives a sense of self fulfillment to the employees. According to Kautilya the organization's philosophy should be clearly defined and the leadership should be such that it complements the organization philosophy. Kumar and Rao (1996) state that Arthashastra suggests development of a corporate culture based on organization philosophy and leadership and this culture should imbibe the values that are supposed to guide the organization's members and should be able to check unethical practices

Arthashastra had given critical principles of management which are valid even today. These philosophies are being applied to modern business as they strive for shareholders' wealth maximization. These principles of Arthashastra can be modeled and abbreviated as SHASTRA.

• S stands for Social and society development
• H stands for Higher propose
• A stands for Authority and administration
• S stands for Standards and values
• T stands for Training and development
• R stands for Reliability and transparency
• A stands for Association and group dynamics

Ref: Rishi Manrai Utkarsh Goel “Stakeholders' Welfare and Arthashastra: Learning for Modern Business Management”, Journals.smsvaranasi.com/download; Vol. IX No. 2, September 2016 - February 2017 accessed on 20 08 2021.