Will markets bring social responsibility? Lessons from Fabindia Incident
Among
the top garment retailers in India, Fabindia outlet in Goa was in the limelight
when an alleged instance of voyeurism was exposed by the Union HRD Minister
Smriti Irani. At least four employees of the store was arrested immediately following
the expose. The Goa police allegedly cracked the case in less than a week and
the accused was arrested.The Fabindia incident gained immediate attention of the
public primarily because it involved a Union Minister.It is very likely to fade
immediately more or less due to the same reasons. However, there were other
important aspects of the case that remained less explored. In the forefront of
these aspects is how ‘markets’ take up responsibility in tiding a crisis.
Unlike the case fading suddenly, market responsibility is likely to have
beneficial long term consequences.
A
major lesson that could be learned from the Fabindia issue is that ‘markets
could bargain social responsibility more quickly than state action.’ To
highlight the lesson, it is important to look at what pressures prompted
immediate response from the state. A Minister’s involvement was decisive.
However, beyond that was the concern of the investors in Fabindia. Investors in
Fabindia range from artisan collectives to private investors and equity
holdings by employees.Hence for the market, the issue was not an isolated case
of voyeurism but a possible disturbance to the brands market value which in
turn have direct consequences on the investors. Concepts like trust, fairness,
and responsibility which are accepted as given in a society does not grow in
isolation. It arise in exchange and when voluntarily agreed as mutually
beneficial. For an enterprise operating on a large scale these factors also
sets in the immediate conditions for the growth of rules governing them. Fringe
elements acting to violate trust find no acceptable place in these exchanges
not because they are punished legally but because they are dis-incentivized by
the system itself.
The
Fabindia issue is a reflection of how such theoretical possibilities in the
market are realised. The investors in the retail chain including I Capital and
Premji Invest were compelled to step in and demand thorough investigation on
the issue due to the same factors. When the investors accepted responsible
behaviour it was but a natural course that the law took to arrest the accused.
It thus became a case where the market and its various stakeholders had greater
benefits in solving the problem it faced.Other issues remaining (on whether the
accused are in fact responsible for the alleged incident), the market’s
necessity to find a solution also helped to raise a platform to debate crucial
questions. The ethical use of cameras in the stores was thought of in a more
systematic manner following the incident. It is likely to lead to further
innovations and models which could strengthen the current practices.
Such
possibilities in the market are abundant. However, in most cases the State uses
legislations to suppress rather than extract these possibilities. This is also
a strong case to dissuade banning as a legal measure adopted by the State. There
are more possibilities. State machinery faces constraints and difficulties. It
is not easy for the police to check incidents like ‘camera tilt towards change
rooms’. Police inspection is possible at times but not possible throughout the
year. If the investors keep a tab on the enterprise and force them to adopt
ethical practices and decent behaviour from the company where they invested
that would be more effective than policing. Also, a brand like Fabindia can
create flutters among all the players and they would be cautious and more
transparent in adopting precautionary steps to avoid such incidents in their
premises.The Fabindia episode highlights responsible behaviour as an inherent stabilizer
in market action. The incident reached a natural solution because people valued
their invested money and stood to protect its value. Free markets is an ideal
ground to absorb negative externalities.
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* The authors are Chairman and Director (Research) of CPPR. Their views are personal and does not reflect that of Centre for Public Policy Research
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