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Brexit And Role Of Leadership

Leaders are (s)elected to take decisions that are in the best interest of the nation, after considering its technicalities and its long-term implications, and not to throw decisions back to people

Photo Credit : Reuters

Like the rest of the world, Brexit has riveted many of us in India for the last three months. While implications for India are debatable and look marginal at the moment, what is undeniable is that the implications for Britain are enormous. I couldn’t help wondering if a decision that involves inter-nation negotiations, with such long-term consequences, mostly irreversible, should be decided by the referendum process in the first place.

But let us first look at what is at stake. Advocates for Brexit argued that the UK would be better able to manage immigration, free itself from onerous regulations of the EU, draw up their own regulations, and spark dynamic growth. Also, what bothered them was the number of EU migrants in the UK, which nearly tripled from about one million to over three million between 2004 and 2015. They also argued free movement of people makes UK’s security vulnerable.

“Stay” campaigners argued that belonging to the EU allows the UK barrier-free access to the single EU market with more than 500 million consumers and over $18 trillion worth of GDP. That it has also allowed the UK to punch above its weight in trade since the larger EU bloc can negotiate more favourable market access deals.

My own view is that free movement of labour keeps labour costs competitive and makes the economy more competitive, but that is neither relevant nor the material point of this article. What caught my attention is whether it is right to decide on the future of a nation by asking the general public to vote on such matters.
Any referendum represents a view of the people at a particular point in time. And that can even get influenced by the recent developments close to the voting. What if a particular decision is popular but not the right decision for its long-term interests? What if the public is guided by expensive campaigns or by celebrities who hold sway but are not necessarily right? Most important, what about a highly probable situation where the voters are not sufficiently aware or informed about the technical aspects of a decision?

Leaders are (s)elected to take decisions that are in the best interest of the nation, after considering its technicalities and its long-term implications, and not to throw decisions back to people. Why make such an election promise? To draw a parallel, imagine a company which requires a painful reform or restructuring in order to survive or become competitive, and try asking the affected parties of the restructuring to vote on the decision! Try taking an M&A or restructuring decision or even leave, compensation, perks, cost-cuts for a large organisation by way of a referendum, and you know which way the votes will go.

At least in hindsight, it is clear that the reforms of opening up the Indian economy in 1991 have immensely benefited the country and taken millions out of poverty. But imagine if those reforms of allowing FDI and FIIs were subject to TRP focused national debates on prime time TV, with champions shouting emotionally about sellout of the country, followed by a referendum. The reforms would have just gone with the wind and millions would have languished till date.

As a leader of a company, team or nation, you simply “have to do what you have to do” in the best interests of your teams, popular or otherwise, after making your best efforts to explain. If you hide behind the crowds, don’t call yourself a leader, call yourself a follower of the crowds.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Tags assigned to this article:
magazine 08 august 2016 Brexit india economy leadership

V Vaidyanathan

V Vaidyanathan is Executive Chairman at Capital First. He is an alumnus of Birla Institute of Technology and Harvard Business School and is a regular contributor on financial and banking matters in India and international forums

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