Of Corporate Governance and Ethics
Feb 8, 2009

Satyam Computer Services Ltd won the Golden Peacock Global Award for Excellence in corporate governance in September 2008. Three months later, on 7th January 2009, the chairman of Satyam Computer resigned, sending a letter to its Board detailing large scale financial irregularities carried out in the company for the past so many years.

Don’t you see a contradiction here? Doesn’t corporate governance have something to do with corporate ethics? Or is it just well crafted policies and statements in spiral-bound books and a few pro bono activities covering up for the basic ground realities that go on in the corporate world?

No, I am not pretending to stand on high ground and trying to preach morality. I am only pointing out that if we do not wish incidents of the order and enormity like in Satyam Computers or Enron (or others yet to unfold) to recur, then we need to start practising governance and ethics at the grass root level – not just at the superficial level to meet statutory disclosures. We need to stop taking certain kinds of corporate activities for granted, stop having a ‘chalta hai’ approach to the petty misdeeds that we keep doing every day in our corporate lives.

There is a saying in Bengali which translates into “Theft and deception are great forms of art, as long as we do NOT get caught”. And I must say that most of us are artists, at least petty,  if not great.

In the corporate world, we can find many such works of art. Does the list below – of commonplace examples of accepted unethical practices in today’s corporate world – look quite familiar?

  • Inflating expense statements – by including non-spent conveyance, personal entertainment with family/friends passed off as client entertainment and so on.
  • Over-booking or under-booking of sales invoices in order to meet sales targets, to inflate or hide profits, to earn incentives etc.
  • Over or underbooking of liabilities depending on whether funds are to be taken out or profits to be inflated
  • Overcharging clients by communication agencies with dummy third party invoices.
  • Using unlicensed/pirated software.
  • A private company or partnership or sole proprietor ‘purchasing’ bills to reduce profits and thus reduce taxes.
  • Multinationals fine tuning profits to meet budget and market expectations. Tune it down when above budget and tune it up when short, but always be on budget.
  • Listed companies smoothening the profit graph. We believe the market does not like ups and down, just steady profit growth, even if that is unreal
  • Private entrepreneur selling equity stake to multinational investor – try and hike up profits to increase valuation and hope like hell, the DDR doesn’t pick it up.
  • The age old practice of siphoning funds off the system and bribing officials with only part of those funds.

The above list does not even cover half the tricks of trade. Oscar Wilde had said “Morality, like art, means drawing a line someplace.” Where do we draw the line? Do we make exceptions only for ourselves? Or do we follow what Mark Twain said – “Honesty is the best policy – when there is money in it.”

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8 Responses

  1. Irene

    The many works of so called art in the corporate world that you have listed seems to have been in existence right from the moment of its conception. There should be no question of drawing the line anywhere.The corporate world has to cleanse itself completely and start off anew with Corporate Ethics as its launching pad.

  2. I agree that in principle there should be no need to draw a line and the cleansing should be total. In practice, drawing a line helps making a start – you know where to begin. The other aspect is that values, ethics, morality etc change over long periods of time, over generations and centuries – we need to keep that in mind as well.

  3. Pradip Chanda

    In your list of common office larceny you forgot what Dilbert had pointed out: take pads and pencils and pens home for the kids, pocket tea bags and coffee satches from the dispenser and so on and on…

    How come only Bengalis have such a saying? Is anybody aware of any such adage in any other language?

  4. Yes Pradip, and then (in the olden days – before smoking bans) there were the ashtrays and paperweights and we can go and on; and in modern days Term deposit certificates……
    Either Bongs are good at this art or good at catching them at the act.

  5. Prince Asirvatham

    I share a “back to basics” view in your article. From my audit experience, governance, like thrift, requires a penny focus. If we can learn to avoid using the corporate telephone for personal calls or pay for it ( as Chairmen of some corporates do), then the mind is set on a right track and the gradual depravity, ending in an Enron or a Satyam, is consciously avoided. In a cash fraud, there is no forgiveness – neither by the union nor management. Your pointer to also avoid indirect thefts from the cash box is indeed a simple guide to sustainable corporate integrity. Thanks for the time to reflect and start again.

  6. Very well said Ujjal. Its really something for each exectuive to reflect on. Reading your post, I got motivated to post on this issue in my blog too.

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