The oldest surviving tablets of written text are from the Sumerian civilisation. They date back 4,200 years and tell the story of King Gilgamesh of Uruk. Gilgamesh was a tyrant who brutalised his subjects. The people were unhappy and appealed to the pantheon of Sumerian deities. In response, the gods created an exact double of Gilgamesh called Enkidu with comparable power and authority. The result was the creation of a “narrow corridor” in which both checked and balanced each other into cooperating rather than competing. Uruk returned to peace.
The “Gilgamesh solution” is to create a space in which conflictual forces can work together to generate a positive sum outcome. I learnt of this solution from Nobel Laureates Daron Acemoglu and James A Robinson. They wrote about it in their book Why Nations Fail in the context of the relationship between an autocratic state and society. I decided to apply it to a contemporary corporate dilemma.
The key factors for business success in the 21st century are fundamentally no different than those that brought wealth and power to the American robber barons of the late 19th century. Andrew Carnegie, John D Rockefeller, and Cornelius Vanderbilt made their fortunes by focusing on cost control, quality, operational excellence, innovation and leadership. These factors remain the necessary ingredients for success. But they are not sufficient. One additional factor has come into play — ESG. Businesses will not succeed if their operations despoil the environment (E), they are insensitive to social needs (S) and/or they are unethical in governance (G). ESG was not a consideration for the robber barons. Most international companies today would lose their license to operate if they ignored it.
ESG reflects the paradigmatic shift that has taken place since Milton Friedman pronounced that the “business of business is exclusively business”. Corporate boards and CEOs now have to navigate the cross currents of stakeholder (societal) interests built around sustainability, social responsibility and ethical governance, shareholder expectations for dividends and return on equity, and management aspirations regarding career, recognition and wealth creation. The Gilgamesh solution offers a conceptual compass to steer through these currents.
I have been an independent, non-executive director of a number of companies for the past decades. My experience covers multiple domains including FMCG, aviation, engineering, auto, media and hospitality. One thread runs through the companies. They are determined to integrate ESG into their corporate norms. This effort is not to “do good” or “feel good”. They expend it because it is good business. They know the failure to integrate would hurt corporate reputation, erode share prices, raise capital costs and deter investors and talent.
This effort is, however, not easy to sustain. The market is a powerful counter. To illustrate: International petroleum majors have been under societal and investor pressure to cap their production of fossil fuels and invest disproportionately in renewables. Exxon has resisted this pressure while Shell and BP announced they would slowly but steadily reduce the production of crude oil. Between 2019 and 2023, Exxon’s share price rose by 70 per cent, that of Shell by 15 per cent while BP’s declined by 15 per cent. The median return in renewables over the same period was 2 per cent. This signal from the market has been difficult to ignore and in 2023, Shell and BP lifted the cap.
The point is societal interests, shareholder expectations and individual aspirations do not naturally converge. This is because of conflictual human and market dynamics. To align them towards a common goal requires a well-structured plan. The “Gilgamesh solution” suggests that such a plan adopts, inter alia, a two-pronged approach. One, it endeavours to build institutions that facilitate cooperation and not competition. The Sumerian gods created such institutions by investing Gilgamesh and Enkidu with equal powers and authority. Corporate India will have to handle this task without divine support. A first step would be to persuade regulators to stop parachuting mandates from above. Regulators must appreciate that the costs of compliance are high and all too often, the value added is marginal.
Companies, for example, are required to provide annual progress reports on ESG. Many of them create such reports for their own internal purpose. They do not need the regulator’s nudge. But those that do not can easily turn the mandate into a tick-the-box exercise on virtuous signaling. They are in command of the information and methodology for processing this information. They can decide what and how to present the facts on, for instance, GHG emissions, waste matter recycling, green energy use, water management, diversity and inclusiveness. The regulator does not have the expertise or time to establish the veracity of this information.
The point is that such compliance measures do not alter the reality on ground. They detract from more productive efforts and skew the playing field in favour of larger corporates that have the resources to comply. Regulators should adopt the principle of “trust and verify”. If nothing else, this would help create institutions that facilitate convergence.
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Two, squeezed between the demands and expectations of society, shareholders, and the regulator, there is a “narrow corridor” in which divergent interests can be balanced. The effort should be to find this corridor and move into it. This requires not just the institutions that check the innate human tendency to seek more power but also a process by which all parties agree to walk down this corridor together. The conditions precedent for such a process is the presumption of co-equality and continual “interaction”.
Corporates face a hard truth. There is no trade off between profits and principles. Whilst they cannot afford principles without profits, they do not deserve profits without principles. The “Gilgamesh solution” helps crack this conundrum.
The writer is chairman and Distinguished Fellow, Centre for Social and Economic Progress
