Business Ethics Tathagat Varma Session 10/12: 11-‐Sep-‐09
Rotary 4-‐Way Test • From the earliest days of the organizaAon, Rotarians were concerned with promoAng high ethical standards in their professional lives. One of the worlds most widely printed and quoted statements of business ethics is The 4-‐Way Test, which was created in 1932 by Rotarian Herbert J. Taylor (who later served as RI president) when he was asked to take charge of a company that was facing bankruptcy. • This 24-‐word test for employees to follow in their business and professional lives became the guide for sales, producAon, adverAsing, and all relaAons with dealers and customers, and the survival of the company is credited to this simple philosophy. Adopted by Rotary in 1943, The 4-‐Way Test has been translated into more than a hundred languages and published in thousands of ways.
Ethical Dilemma Grid • A 2005 global study of over 1100 managers and execuAves, commissioned by the American Management AssociaAon idenAﬁed the top three factors most likely to cause business people to compromise ethical standards. All three impact most of us from Ame to Ame, so it would be an unusual person who would not have experienced temptaAon. The factors, in order, are: – Pressure to meet unrealisAc business objecAves/deadlines – Desire to further ones career – Desire to protect ones livelihood • So here is a theory. Model the dynamics that put pressure on peoples ethics and you have an early warning of possible problems.
Ethical… • Dynamic A is Pressure. SomeAmes the pressure to compromise comes at a person externally on vectors such as: – Urgent Aming, I dont care what the policy book says, I need your decision now. – Entrenched opposiAon that can be avoided, HR wont ﬁnd out All it is too late – Superiors or colleagues, If you dont do this, well all pay a price – CriAcal impact, NaAonal unity is at stake here – CompeAtors tacAcs, CompeAAon gives them money under the table. We have no choice. • Any single one of these, let alone a combinaAon, can isolate a person on ethical grounds.
Ethical… • Dynamic B is Personal Beneﬁt. Even scrupulous people generally look at choices through a lens of self-‐interest that includes: – Financial gain – Financial risk – ReputaAon – Career and stature – Power and inﬂuence • The greater the personal upside or downside associated with a decision, the more internal pressure will build to compromise on honesty and ethics.
Ethics… • That is what our panel of 1100 managers in enterprises around the world thought. If you want an ethical organizaAon, our research recommends you should have: – A code of conduct -‐ known and enforced – Ethics training -‐ for everyone, with annual re-‐ cerAﬁcaAon – Social responsibility programs – An ombudsman -‐ for unvarnished feedback to the C-‐ Suite – An Ethics help line -‐ for immediate guidance on issues – Ethics audits -‐ of all stakeholders including suppliers
Indian Context • Jagdish Sheth, execuAve director of the India, China and America InsAtute and a professor of markeAng at Emory University – Indian business culture puts a premium on favors, friendship and clanship. Friendship is highly valued, whether based on mulAgeneraAonal family friendships, school friendships or personal friendships. The Western concept of conﬂict of interest does not always mesh well with the Indian value of loyalty to one’s group. – Western business has its own versions of these ideas: Procurement departments in U.S. companies are more likely to buy from the company’s customers, for example.
Indian… • In terms of government rules and regulaAons, Sheth said that in India, the government acts as a gatekeeper rather than an enabler, with slow approval, a complex bureaucracy and corrupAon. Enforcement is also lax. • There is a strong belief in corporate social responsibility in India, Sheth said. He also noted how Indian management style diﬀers from that in the West: Decisions are made by the person at the top, not in a parAcipatory way. And there is what he called a caste system by educaAon.
Indian… • What are the implicaAons of these diﬀerences – and of India’s rise – for business ethics? Sheth cited, among other ideas, a shic from a focus on shareholders to a focus on stakeholders. He predicted that ethics will be anchored to the idea of business as a profession, similar to the way the ﬁeld of medicine is now. And he said there will be global standards of governance, but their applicaAon will be adapted to local condiAons.
Wipro -‐ Premji • Even as it stands out for its sterling ﬁnancial performance, Wipro is a good example of a rare Indian company that plays by the rules. Apart from innovaAon and giving the customer value for money, the organizaAon pays great adenAon to integrity in all its business dealings. • According to Premji, being ethical is a business tool that gives structure to Wipros funcAoning and brings in more business in the long run. "We have had no problem with pracAcing the value of integrity. Because Wipro has a reputaAon of being transparent in every respect, we have saved Ame and eﬀort in conducAng business interacAons and Wipro employees have been able to stand public scruAny and maintain their self esteem under all eventualiAes," the shy and reAcent Wipro chairman has been quoted as saying.
Wipro… • At Wipro, integrity comes into play in all situaAons, within the company itself as well as in its dealings with the outside world. The story is ocen recounted in Indian business circles of how Wipro had to wait for 18 months to get an electricity sub-‐staAon for one of its units because the company refused to bribe the concerned people. The unit was run on capAve generaAon for nearly 20 months. This cost the company dearly but Premji preferred that to breaking his values. • Another anecdote has Premji asking a senior general manager of the company to leave because he had inﬂated a travel bill. The mans contribuAon to the company was signiﬁcant; the bills amount was not. Yet he had to go for this solitary lapse. It was, Premji stressed, a mader of principle.
Wipro… • Wipros code of conduct for employees says it all: Do not do anything that you are unwilling to have published in tomorrows newspaper with your photograph next to it. • It is this kind of integrity that has catapulted Premji and Wipro to unprecedented heights. But then, Premji has never been your usual Indian businessman. Unlike others of his ilk, he shuns ﬂashy cars and drives an ordinary Ford sedan. Even today, he ﬂies economy, stays in budget hotels and asks his managers to do the same. None of his relaAves ﬁnd a place in Wipro.
References • hdp://www.san.beck.org/EC10-‐Social.html • hdp://content.msn.co.in/MSNContribute/Story.aspx? PageID=94bd7e1e-‐670f-‐4287-‐914c-‐a17badd98tf • We failed to communicate, says Coke India • India: Using Ethics to Build an Industry • Business Ethics in a Global World: Indias Changing Ethics • Business Ethics: India Knowledge @ Wharton • Coke & Pepsi in India • hdp://www.in.iofc.org/node/40481 • hdp://assets.cambridge.org/97805218/63797/excerpt/ 9780521863797_excerpt.pdf • The Business Ethics of JRD Tata • Confucian Ethics, China and India • hdp://www.ﬁnancialexpress.com/news/business-‐ethics-‐leadership-‐ qualiAes-‐intertwined-‐ghandy/199102/ • hdp://www.amnesty.org/en/library/asset/ASA20/002/2009/en/ 79a5264e-‐2dd2-‐44f1-‐8c92-‐b2f0cd8f5c72/asa200022009en.pdf