Trim The Middle, Man

India Inc’s New Mantras?

• More good comes from doing your own business well and honestly than from philanthropy.
• Honour and fete the honest businessman, and others, who are known to be honest.
• In MBA classrooms, show cases of honesty from life: show how the corrupt fail more often.
• Realise that often business is responsible for the creation of a permissive environment, which exaggerates systemic flaws.

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“This kind of contradiction arises because of the confusion between short- and long-term goals (among businesses),” says Shankar Venkateswaran, director, SustainAbility, an independent think-tank and strategy consultancy. “When in fact, it is in the own interest of businesses to manage in such a way that there’s a positive impact on society and the environment,” he explains.

The first stumbling block to ethical business conduct, Venkateswaran says, comes when companies look for ‘end of the tailpipe’ solutions rather than long-term ones. Ten years ago, he says, a Supreme Court order raised the emission standards for vehicles on Indian roads. At the time, most companies responded by resisting this order. Next, they protested the cost of upgrading technology. Finally, they settled on a solution, and proposed a catalytic converter, a new-fangled device that could ‘fix’ emission problems when attached to the exhaust pipes of any old vehicle. “When you try and fix a problem this way, you will find that it is more expensive in the long run (to business, customers and the environment),” Venkateswaran advances.

Ultimately, the auto companies’ proposed fix was not approved and carmakers across the country had to rethink their designs, procurements and suppliers—everyone has to emit less to ensure that the cost of a potential future clean-up is lowered. In many ways, the auto-makers’ struggles have a lot to do with fighting corruption in any business system today. The quickfix approach, says business, contributes to society through profits; the longer-term approach says all social costs need to be added up and weighed against benefits.

“For the entrepreneur or student of business, it is equally important that the way out of corruption does not stifle innovation,” says Roy. This, some believe, is a particularly relevant issue at the moment, when all seem prepared to hit corruption with a giant axe. “Who will, in a climate of fear and suspicion, step out of his shoes to give the next Rs 10,000 loan to an Infosys or Wipro in-the-wings, if he is forever afraid of his wings being clipped?” asks Roy, who worries that India runs the risk of creating a tyranny of book- and record-keepers unless there is a closer, harder examination of what corruption really is.

Managers and wannabe entrepreneurs are all too often isolated from those who call the shots in companies. This, too, often stifles change, warn experts. For instance, argues Venkateswaran, a top-level manager in a large company may resist a major change in environmental practices—as often the changes are considered not worth implementing due to the expenses involved. “Yet, if I get in the door of the chairman or the owner of the same firm, I have found the response is positive,” he says.

Maybe he’s right, and the bigger picture really is clearer at the top. Management experts agree with the idea of a flatter organisation: If all employees can communicate with the CEO, even the board, it’s that much harder to disguise corruption as a routine activity. “Fraudulent activities typically breed in an environment of secrecy and privileges,” says Rekha Sethi, director-general, All India Management Association (AIMA), the apex institution for professional managers in the country. “A CEO must have a second line of defence: a deviance reporting system. Oral orders and instructions mustn’t be allowed and there must be a paper or electronic trail for all official communication,” she recommends.

For B-schools, which handle the everyday flow of new recruits into management positions, it is not enough to simply wait for regulation and social expectations to weed out corruption. What works, they argue, is keeping the original objectives of business management in mind: doing business for the sake of profit, but also managing them well—in the interest of society. Keeping a track on their impact is tantamount to fighting wrongdoing in this instance.

“A company’s performance should also be judged by what it gives to society and all the stakeholders, including those perhaps not interested in the profits alone. In the long run (though it is hard to say exactly how this happens), classroom-learning on ethical behaviour comes to their aid in allowing them to reflect and introspect on the complex business situations and the decisions they have taken,” reasons J.L. Gupta, professor, HR, at the Management Development Institute in Gurgaon.

Gupta says that new teaching practices seem to help: the use of novels, classical literature and plays that draw from different corners of the world and supplement the usual diet of case studies has been a “well received and effective” way to influence student perspectives. “This,” says Gupta, “is based on the feedback we have got from students even after they graduated to work in a business. A good number of B-school students and graduates do feel a strong need to contribute to society.” Perhaps the way of doing so is by stressing that business has not changed—what has changed is the perception of what it means to succeed or fail in a business.