Third Edition Spring 2013 - Institute of East Asian Studies, UC ...

Thus, the Arthashastra remains as relevant today as duringthe era of feudal states because “There is probably no place or systemof controlling the world today that more closely resembles thehighly competitive, dangerous, and fast moving world of the feudalstate, with the accompanying great rewards for success, andgreat punishment for failure than the modern business or corporation.”15 Kautilya’s treatise is focused primarily on forming andthen controlling of a very particular type of organizational structure.He provides a practical way for managing these specific structures.Due to the inherent similarities between the structures ofthe political states described by Kautilya and the modern corporation,Starzl and Dhir claim that “the mapping of the structure ofa corporation onto the structure of feudal states is not too difficultto do, and thus the application of the Arthashastra to the moderncorporate world should be no more difficult to accomplish.” 16 AsStarzl and Dhir have shown, the Arthashastra is relevant to the corporateworld and its strategies can be applied to the managementof corporate structures. There is certainly potential for Kautilya’sstrategies to have a significant impact on the formation and maintenanceof corporations, which are—from a purely organizationaland structural standpoint—the modern day equivalent of feudalstates.Following Starzl and Dhir demonstrating that the strategiesof the Arthashastra are applicable to the corporate world due tothe similarities in structural organization between the ideal Kautilyanfeudal state and the modern corporation, scholars beganto apply Kautilyan strategies to business. One such example is N.Siva Kumar and U.S. Rao’s derivation of value-based managementguidelines from the Arthashastra. Value-based management refersto the management approach that ensures corporations are managedconsistently on value, usually with the focus of maximizingshareholder value. Kumar and Rao’s approach for developing a“value based management framework” focused on five key components:“organizational philosophy, valued based leadership, inter-15 Timothy Starzl, and Krishna Dhir, “Strategic Planning 2300 Years Ago: TheStrategy of Kautilya,” Management International Review, 26, no. 4 (1986): 76.16 Ibid.nal corporate culture, accomplishment of corporate purpose andfeedback from stakeholders.” 17 Kumar and Rao show that Kautilya’sArthashastra provides guidelines for each component of themanagement framework, thus displaying the relevance of the Arthashastrato the world of modern corporations.I will now examine these five components, in both the strictKautilyan sense and the application of Kautilyan strategies to value-basedmanagement, in order to demonstrate specific applicationsof the Arthashastra to modern business and economics. Indiscussing the organizational philosophy—or purpose of existence—ofthe state, Kautilya believed that a welfare state exists forthe benefit of its people, as shown in Book I of the Arthashastrawhere Kautilya writes that the king’s welfare lies in the welfare ofhis people. When applying these guidelines to value-based management,it translates into corporations or businesses existing forthe benefit of its stakeholders and society. 18 Kumar and Rao thengo on to discuss Kautilya’s guidelines for value-based leadership,the second component of their framework. “The leader’s primarygoal according to the Arthashastra is to fulfill the philosophy ofthe organization.” 19 Thus, a good leader exists solely for the benefitof those he leads. In order to realize the goals of an organization,the Kautilyan leader must be virtuous and selfless, and hemust lead by example. 20 The next component of Kumar and Rao’sKautilyan model of value-based management is an organizationalculture that promotes value-based management. The two scholarsmention that a major problem in modern corporations is thelack of a moral corporate culture that promotes ethical behavioramong its employees. 21 Unlike many modern corporations, Kautilya’sArthashastra does promote a moral culture by requiringcertain values from the organization’s members, only appointingofficials based on character and conduct, rewarding righteousbehavior, and punishing unethical behavior. 22 The application of17 N. Siva Kumar, and U.S. Rao, “Guidelines for Value Based Management in Kautilya’sArthashastra,” Journal of Business Ethics, 15, no. 4 (1996), 41518 Ibid., 41619 Ibid.20 Ibid., 416-41721 Ibid., 41922 Ibid., 419-42061 Ramanathan Veerappan Kautilya’s Arthashastra 62