Gandhi’s birth anniversary this year is an appropriate occasion to examine his idea of trusteeship. The dispute involving Tata Trusts and Tata Sons has made it a live question: how can a business preserve a social purpose across generations, especially when those entrusted with it disagree?
Mahatma Gandhi accepted that talent and enterprise could create wealth and livelihoods. But what did ownership entitle a person to do with that wealth? In 1939, he wrote: “The rest of my wealth belongs to the community and must be used for the welfare of the community.”
By ‘the rest,’ he meant what remained after an honourable livelihood. That wealth would be held with owners who must act as custodians and trustees for society.
Trust is at the heart of economic life. Workers place their safety and livelihoods in the hands of an employer. Customers rely on its products and entrust it with their money and data. Communities provide land, water, public infrastructure and the stability that helps businesses grow. None of these contributions appears fully in a company’s financial figures.
In addition, unborn generations inherit the effects of decisions made today. As enlightened corporate citizens, companies are expected to take these effects into account. Such companies earn an implicit licence to operate, with society’s unspoken consent renewed by their conduct.
The Tata Group provides a rare example of an ownership structure built around public purpose. Philanthropic trusts hold 66% of Tata Sons, the group’s holding company. The Trusts draw on wealth created by successful businesses to support education, health and other causes. Those businesses, in turn, must remain competitive and well run if the Trusts are to sustain their work.
Tata philanthropy stretches back more than a century; the Trusts’ commanding stake in Tata Sons gives that commitment an institutional form. This seems like a working model of Gandhi’s idea.
That model is now under strain, with disagreements over leadership and a possible public listing on the stock market. There are legal questions, regulatory requirements and rights of shareholders to consider, none of which can be waved away by invoking the Tata legacy.
Equally, the value of an ownership structure dedicated to philanthropy cannot be solely measured by the prevailing market price. Hence, this dispute deserves a resolution that respects both sound business governance and the purpose for which the Trusts exist.
The Tata inheritance belongs to the public in a moral sense, alongside the legal rights of its owners and the duties of its directors. This is a test of whether those rights and duties can work together with the Group’s philanthropic mission.
Other arrangements are possible that reflect the spirit of Gandhi’s trusteeship idea. Azim Premji committed substantial wealth from his own holding in Wipro to philanthropy while keeping philanthropic institutions apart from control of the company. The Tata Trusts combine philanthropy with decisive ownership at the apex. Both approaches can serve society.
The Tata approach requires especially clear rules on who makes business decisions, who holds decision-makers accountable and how the Trusts fulfil their charitable duties.
Gandhi’s idea also reaches inside the firm. A company may fund hospitals while also exposing workers to avoidable danger, paying small suppliers late or damaging local water sources.
India’s corporate social responsibility law directs qualifying firms to spend 2% of their average net profits on social causes; much useful work may result from this. But expenditure after profits are earned cannot by itself tell us how responsibly those profits were earned.
Is trusteeship too dependent on the goodwill of owners? Gandhi understood the difficulty. He called absolute trusteeship “an abstraction like Euclid’s definition of a point,” yet thought it worth striving for. He also recognized the need for public pressure and regulation. His economics has a clear foundation in human dignity, restraint and the welfare of others, even if it does not supply a complete rulebook for a modern corporation.
That foundation is a good guide for decision-making. Boards can hold leaders answerable for worker safety, fair treatment of suppliers and environmental harm, alongside financial performance. Communities affected by large projects can get a real hearing. Trust deeds, board rules and succession plans can protect a public purpose if a widely respected leader is no longer around to reconcile disagreements.
Classical economics has much to say about how markets organize production and exchange. Marxian economics asks who owns the means of production and who gets the gains. Gandhi asked what obligations follow from the power to own and produce. Human dignity, restraint and the welfare of others were part of this Gandhian economics. These questions can arise under private ownership, worker ownership and state ownership alike.
Gandhi wrote: “A trustee has no heir but the public.” The Tata dispute shows how difficult it can be to safeguard that principle through changing times. Its lesson for other businesses is to ask, while building wealth, whose trust makes that wealth possible—and how that trust will be preserved among those who come after us.
The author is senior fellow with Pune International Centre