Case-study based learning:business ethics


Business ethics is extremely important in today's globalized business environment. Business ethics can help the organization survive and grow for generations. Organizations that were very particular about business ethics continue to do well even today. Some examples are quoted in this article. This includes Business ethics as practiced by the leaders of business organizations.

Introduction

Business ethics can make a huge difference to any business organization. When practised as a way of life, business ethics helps the organization to stand tall, among several such organizations in the same industry. Such practices enable the organization to become a sort of benchmark for business ethics in the particular industry. This article deals with business ethics, with specific reference to a) Walking the Talk b) Setting examples for others c) Having transparency in accounting practices d) Satisfying all stakeholders and e) Building organizations that last for centuries.

Walking the Talk

Mr Narayamurthy the founder CEO of the Indian multinational giant called Infosys Technologies, was an exemplary Business leader who practised the highest form of business ethics. It was very clear from day one, that he was one who practised what he preached.

For instance, for decades, when he was the Chief Executive, he always made it a point to come first to the office. He also left his office as the last employee. Though his holdings would have fetched him billions, he lived a simple life. His leading by example made every single IT person look up to him as a Guru of sorts. Even today, when he is not so active, his leadership and his imprint are still alive. He is still very active, talking about the roles of business organizations in the context of the wider society. There is a sabbatical scheme, where employees take time off to do constructive social work. The personal contributions of this great business leader are still being celebrated. His wife, Sudha Murphy, is also involved in promoting and sustaining several social causes.

Those in IT would readily count Mr Azim Premji of Wipro, alongside Mr Narayanamurthy, for the same kind of business ethics. This outstanding leader would pay all taxes and has made business ethics the foundation of all practices. HR managers always quote one remarkable of business ethics: a union leader in Mumbai had faked a bill for a ridiculously small amount of twenty rupees. Azim Premji stood his ground and sacked him. The inevitable strike followed and the workers wanted to reinstate the sacked trade union leader. Premji merely said that he would simply close down that particular office and move on. The workers relented and came back to work, after a few months. Such is the highest standard of business ethics, practised by Wipro and Mr Azim Premji.

Apart from one or two leaders like Ratan Tata, Premji has donated hundreds of scores of his own money for the cause of education of needy children in two or three States. The moral authority of these outstanding two business leaders gives them the guts to take on social causes and criticize everything that is wrong in society. They simply walk the talk. Period.

Setting examples for others

Needless to add, the aforesaid leaders have always set examples for thousands of employees who simply subscribe to the ethical practices and the high ethics of the leaders. The Tata and the TVS groups have also always set examples for others to follow. The highly ethical practices being followed by Sundaram Finance has not only made it a leader, but it has also made the other major NBFCs follow such ethical practices.

The highly ethical practices followed by the founder of Grand Sweets and Snacks, Adayar, Chennai, has been the subject of many a case study. Not a drop of oil would be re-used. It would be poured down as waste, in full public view. The founder was so wedded to ethics as a way of life. The founder is dead and gone. However, even today, this business enterprise, called the GSS group, maintains the same high standard. Yes, it is a very costly brand, but customers do not mind paying the extra money to get what they want -- high quality of snacks that they cannot find elsewhere. Today, it does a major competitor called A2B, which is one of the fastest growing restaurant chains of South India. However, A2B also stands for purity and quality.

To ensure the smooth implementation of labour laws, the State Governments have individuals called the Inspectors of Factories. There are so many gaps between what should be done and what is being done, by most organizations in most of their factories. This opens up the gates for corruption. These Government officials demand bribes and get them to the tune of several thousands of rupees. However, the diversified conglomerate called Murugappa group of Chennai has one policy made very clear to every HR Manager in its factories: implement everything as specified in the rule book. Never encourage any discussion with the Government official. Ask him to have a cup of tea and keep going. If there is anything he wants to write in the logbook, so be it. The organization will face him in court. This mantra has worked like magic. The Government officials jolly well know that nothing will work in this huge conglomerate. Readers can also get a glimpse of the highest form of business ethics and concern for the wider society from an earlier article in this series on Founders and their Visions. This article is
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In fact, many organizations tend to follow the same practices. The positive spin-off is really very good.

Having transparency in accounting practices

Some three decades ago, Satyam Computers was the shining star of Andhra Pradesh. However, a big fraud in accounting practices revealed that all what not okay with the company. The founder-CEO was arrested. The rest is history.

The same organization was taken over by Mahindra and Mahindra group and is now called TechMahindra. It has grown from strength to strength since then. The Tata group of companies, The Aditya Birla Group of companies, L&T, BHEL, Asian Paints, the TVS group of companies and the like, have accounting practices that reflect their intent to get ahead in life and incorporate excellence, with very honest practices. This is itself a huge service to society, as modern organizations have huge access to public money. On the other hand, the Essar group, the GVK group and Jayaprakash group, are all in deep trouble, as they not only have deep debts to manage. Their playing around with public money has never been appreciated.

Satisfying all Stakeholders

The stakeholders of a modern organization are the customers, employees, suppliers, the founders and their families, the State/Central Government, and the general public of the place in which the organization has its manufacturing plants or major services. Business ethics dictates that the modern organization does not deviate from satisfying any single stakeholder. For example, if the employees are not given their statutory dues like the PF on time, it is not practising business ethics. It also has to ensure that the employees get their salaries and perks on time. The Tatas and the TVS groups are excellent in this regard.

Building organizations that last

Those in Tamil Nadu, will be familiar with a particular non-banking financial company called the Kumbakonam Mutual Fund (KMBF),. It is what is called a "Nidhi" company, and is governed by the rules framed for such companies by the Central Government. There are certain controls exercised by the RBI too. However, what stands out, in this case, is that KMBF is now 106 years old, with several branches in Chennai itself. This company gives a slightly better rate than that offered by the banks for fixed deposits and survives through the jewel loans. Yet, it has never cheated the depositors. The same kind of ethics is followed by many organizations, even in the banking sector, that has weathered many a storm and emerged very successful. In particular, there are three main Tamil Nadu-banks that are doing very well -- they are the Tamil Nad Mercantile Bank, the Karur Vysya Bank headquartered at Karur, and the City Union Bank, that is headquartered at Kumbakonam, a small town near Tanjore in Tamil Nadu. Each of these banks is more than at least eighty years old.

The Tatas, the TVS group, the Mahindra &Mahindra group, the Aditya Birla group, the Murugappa group of Chennai and so on, are now poised to live through another one hundred years. They are vast conglomerates that have very good core competencies in HR, Finance and in project management. Yes, there will be losses in some companies, but they will always emerge successful.

For example, Tata Motors is now paying the price for a costly acquisition abroad, but its expanding product portfolio and sound engineering skills will make it zoom again. The TVS group has one philosophy that is part of its DNA and cannot be diluted at any stage. It is called zero debts. This group always grows through internal accruals.

Only companies that practice business ethics as a way of life will survive and grow in these times of massive competition.

Conclusion

There are no shorts to business ethics. Those who do well in business ethics will continue to survive as corporate entities for centuries to come. The vast conglomerates have business ethics firmly entrenched in the minds of their employees, to get this done on a consistent basis.


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