Free Press Journal

Ethical values and the modern-day manager


The suicide by the former Tata Finance Managing Director Dilip S. Pendse, once the blue-eyed boy of Ratan Tata, marked an unfortunate end of a corporate head whose career ended in disgrace more than 15 years ago. The incident served as a reminder of the series of allegations that not only ruined what could have been a stellar career in high finance but also sullied the name of the Tata group. Pendse’s suicide note (as reported in the media) speaks of his frustration at the legal process and seeks forgiveness from his wife. The words bring back memories of a suicide note of the Enron Vice Chairman J. Clifford Baxter, who wrote to his wife: “I feel I just can’t go on…The pain is overwhelming. Please try to forgive me.”

The cases against Pendse were relentless and unending. No judgement need be made on what the outcome of those proceedings might have been and there is a lot to be said about the length of the process that can be frustrating, exhausting and in many ways demeaning. That is a part of the Indian system, and it condemns and punishes long before guilt is pronounced. In fact, Pendse’s friend and lawyer has been quoted as saying that his client was a victim of the legal system.

But apart from the immediate headlines, the case will be quickly forgotten. It is unlikely to be an issue of discussion in corporate India. Yet it holds some important lessons for managers and leaders working in an era where growth at all costs appears to be the mantra being imbibed and promoted. Down the line, this message has spawned practices that drive a unidirectional focus on numbers so that the goal, the purpose, the conversation itself in many a corporate circle has changed to reflect this need.

At a surface level, a lot has changed for the better. The regulatory framework (particularly in the financial sector) is tighter, information is more freely available and customers have better protection. Yet, the air itself has changed, as it were, and with it has changed what is expected of the average manager and how this is being delivered. Not everyone is caught in this vortex, but the vortex does tend to pull more and more into its death spiral.

It is true that egregious violations are not new. Ethical decline in society surfaced prominently during the Second World War when black-market was born, as S K Chakraborty has pointed out in an important piece in the Journal of Business Ethics. The license-permit-quota Raj and the so-called Hindu rate of growth also marked an era known for policy manipulation and high corruption. The economic opening up should have put an end to that era. But we have entered a new phase that has seen the rise of many new corporate stars without any adequate precautions on processes, systems and respect not only for the rule of law but also with regard to what is a fair, just and proper way of doing business. It is not that the problem could not have been anticipated. Way back in 1982, K N Kabra wrote in The Black Economy in India: “One comes across a wholesale condemnation of public regulation and controls…These views altogether forget the implications of an uncontrolled market-mechanism economy.”

The State has been virtually forced to respond with new laws like the Real Estate (Regulation and Development) Act, 2016, and the Banking Regulation (Amendment) Ordinance, 2017 to address the ballooning issue of NPAs. It’s not that there weren’t enough laws on the statute to enforce order; the violations ran so wild that they needed special handling.

So earlier, where some businesses manipulated the system, today we have liberalised and opened the floodgates so that there are many more violations, big and small, straddling the corporate ladder. It is pointless to discuss which is worse. What is important to note is that today the average manager is caught in a trap.

Casual conversations with modern day managers tell us how bad this can be. On the one hand is the push to “perform”. On the other is the freedom if not encouragement offered to many to get away without being asked how this performance was reached. To top it is the treadmill that must keep running to finance a lifestyle that has become the hallmark of the Indian manager who has arrived – luxury housing (often of a vertical gated community variety), holidays abroad and expensive education in “international” schools for kids.

In this scenario, and particularly when everyone is playing the game, values are easily given the go by. Unless they are drilled in,  repeatedly reminded and indeed a large and even expensive framework put in place to enforce them and iron-clad protection accorded to whistle blowers, ethics and values will remain the first casualty of the new corporate India. This gives both business and the India growth story a bad name.

An EY (formerly Ernst & Young) survey released this month reported 57% of respondents saying that even though senior management said “no” to bribes, they would choose to ignore unethical actions of employees to achieve corporate revenue targets. EY said India ranks the same as Mainland China with 60% of respondents stating that their company’s ethical standards have improved in the last two years. But 78% also say that fraud, bribery and corrupt practices continue to happen widely in India, followed by 48% stating that it is common to use bribery to win contracts –findings which put India above the Asia Pacific averages of 63% and 35% respectively.

It was the celebrated management guru Jack Welch who divided managers into four categories: those who get the results and have values (so you must keep them), those who do not get the results and do not have values (you fire them), those who don’t get the results and have values (you work with them). But there is the fourth kind which is the most toxic to an organisation: managers who get the results and don’t have the values. Fire them fast, and first. The same may be said about CEOs.

In India, the journey to a more ethical workplace will progress, even if slowly. But what individuals need to understand is that a price is paid for violations. It hits back, sometimes directly and at other times in complex, long winded ways. It was a senior government official who put it rather well in a private conversation: When things go wrong, the price will be paid by the individual. The system is always clean.

Managers will do well to remember that.

Jagdish Rattanani is Editor, SPJIMR. R K Pattnaik is Professor, SPJIMR

(Syndicate: The Billion Press)