There are companies that make profits, the market bellwethers, and then there are companies that make money and inspire awe and respect. A classic example in the Indian context is the Tata Group. To the common man, if it is Tata, it must be right. In fact, when a boardroom brawl erupted within the company a little more than a year ago, observers lamented that even the Tata Group had to face such a situation. This is because the group holds enormous public goodwill. Had any other company been in its place, public sympathy in its favour would have been wiped out entirely.
What does this boil down to? Ethics. The iconic Jamshedji Tata founded the Group during the era of the British Raj of punitive business restrictions; the likes of JRD Tata and Ratan Tata ensured that it abided by the law of the land, no matter what. In a nation where corporates and business groups are perennially viewed with suspicion, this is a quality that is as rare as the Kohinoor diamond. Therefore, it is important that aspiring entrepreneurs and businesses ingrain ethics into their working styles from the beginning.
The question that begs us is: why must businesses act ethically? Businesses have the potential to transform society drastically. Apart from the direct and indirect jobs that they generate, the taxes that get imposed on businesses are used to run government schools, colleges and hospitals, lay roads, improve utilities and public transport. Additionally, schemes that the government envisions for the betterment of society — poverty alleviation, women empowerment, generation of jobs and subsidies for people living on the margins — get a boost. The buses that criss-cross the place you live in can be improved if there are better tax collections. Your house stands a better chance of receiving 24*7 electricity. In short, if businesses comply with ethics, and by extension, the law of the land, they can improve the quality of living of millions of Indians.
What makes ethics? There are moral rules that govern life and help us lead to the path of righteousness. Likewise, there are moral rules that govern how businesses can operate in the right manner. These rules are broadly defined as ethics or business ethics. They are essential because they help us distinguish between the right and wrong, and helping us in the decision-making process. At a basic level, there are rules such as treating employees fairly and equitably, eliminate gender discrimination, staying true to one’s shareholders and ensuring a profit to them, not indulging in graft or bribery and not polluting the environment.
The question that then arises is, who, in a particular business, must abide by ethics? The answer is: everyone. Every stakeholder in the ecosystem of a business must abide by ethics. Ethics is a quality that must percolate from the top to the bottom and vice-versa. The CEO of a car manufacturing company may bag a multi-billion order without resorting to bribes or kickbacks, but the action may be of little use if it makes cars with brake cables or tyres of poor quality. Absolute compliance with ethics ensures accountability, and help businesses carve a niche for themselves. This also engenders the best practices at work. As a result, customers or potential customers will be able to develop trust and strike an instant rapport with the business in question.
No treatise on business ethics can be complete without a mention about Japan, whose famed corporations are renowned for ethical practices. The running joke has it that while a US manufacturing giant wanted to place an order with a Japanese firm, they specified that they adhere to the ‘six-sigma’ principle, wherein no more than six defects can be detected in a million species of parts. They were unsure whether their order would be met. The Japanese firm, while fulfilling the order, also gave them the six defective parts, saying that they found it weird that one would want defective parts.
Wipro founder Azim Premji is known to be an ethical business leader. When the company wanted to start a manufacturing plant on the outskirts of Bengaluru in the late 90s, a Government official demanded a bribe for the sanction. Wipro refused and decided that it would run a captive power generation plant for its operations, at additional cost. The official relented, and the sanction was given to the company. In one stroke, the company signalled its intent to do business the right way, and that it will not cut corners for the sake of profits. Importantly, it gave a textbook lesson for upcoming business on conduct.
While the incident might make for a good narration, it is to be noted that compliance with ethics, especially in larger organisations with large headcounts. Measures that can help achieve the same include developing business standards, ensuring compliance and the setting up a framework for reporting of breach of ethical standards (also known as whistleblowers in different contexts).
In short, ethics is the central parameter in any business organisation. Money once lost can always be earned back; the same does not hold true for the reputation of a business. The infamous Satyam Computer scandal — which scaled heights in business, but had to be shut due to a mega accounting fraud — holds testimony to this statement.