Has business become more immoral than before? Perhaps not; it’s just being exposed more often because of tighter laws and the spread of information technology, says Kanika Datta.
Volkswagen, Rajat Gupta, Enron, Lehman Brothers, WorldCom, Toyota, Bernard Madoff, Subrata Roy, Ramalinga Raju, GlaxoSmithKline, Ranbaxy, Barclays, Bear Stearns, Lalit Modi, Jignesh Shah, HSBC, Lalit Modi, Citibank…
Even a cursory run through this random listing, in no particular order, would reveal a common thread – gold dust for a business historian in search of an overarching theme to assess the first 15 years of the new century.
True, fraud and scandal are scarcely new trends in the developed world, given the sheer scale of global corporations’ activities.
But the 2000s have far outstripped any decade of the preceding century in the frequency and magnitude of corporate crime.
The consequences of corporate deceit are becoming global too, as the sub-prime crisis has demonstrated to devastating effect.
The notable point for India, in the throes of its second decade of economic liberalisation and growth, is that the country has been plugged into global trends in this respect.
The Harshad Mehta and Ketan Parekh stock-market scandals that book-ended the 1990s, the first decade of reform, pale in comparison to the scandals that followed in the 2000s.
Has business become more immoral than before? Perhaps not; it’s just being exposed more often because of tighter laws and the spread of information technology.
But the reason innocent stakeholders – that is to say employees, suppliers, shareholders – should be worried about this escalating trend is the general acceptance gaining currency that doing business is an inherently amoral activity.
This notion has grown in direct proportion to the expansion of business activity, and it increasingly encourages businesspeople to apply amoral standards to their own dealings. Bernard Madoff, Subrata Roy and Ramalinga Raju are obvious examples.
But Rajat Gupta, now serving a two-year prison term in a luxurious facility in Massachusetts, is surely a beacon of this attitudinal convergence.
Mr Gupta once headed a gold-standard consultancy, a job that allowed him to schmooze with the world’s rich and powerful and sit on Fortune 500 corporate boards.
Yet, he seemingly did not think it unethical to participate in the most tawdry of insider trading scandals (yes, we know, he did not make money from the infamous tip-off but others did).
Not that the corporate world is unaware of its deteriorating reputation.
Earlier, businesses didn’t really exercise themselves a great deal about this.
Till the 1990s, the received wisdom was that the business of business was to make profit.
“Greed is good”, as Gordon Gekko said in Wall Street, was an accepted catchphrase.
One symptom of the awareness of an image crisis in business is how much effort is expended on cloaking corporate activities with buzz words that the burgeoning public relations industry – surely one of the world’s fastest-growing service industries – have fashioned for them.
“Shareholder value”, for instance, would have been wonderful alibi for the shady accounting practices that made Enron Corporation so feted on Wall Street in its heyday.
“Stakeholder value,” a variation on the theme for those with a more comprehensive outlook, no doubt encouraged US banks to sell sub-prime loans to unsuspecting home-buyers. That also helped them fulfil “bottom of the pyramid” strategies, another term much in vogue then, not so much now.
Those terms have suffered a marked diminution of popularity since the 2008 sub-prime crisis and global stock-market collapse.
The new Big Idea is Corporate Social Responsibility (CSR) and associated terms. In some ways, the selective CSR mandate imposed by the government has come as a windfall for Indian businesses.
These days, journalists have learnt to develop an instinctive suspicion for companies and businessmen that talk of all or any of the following: “inclusive” growth/development/livelihoods; “sustainable” growth/development/livelihoods; “transforming” lives/livelihoods; and “empowering” (in India, they’re usually empowering women, gender equity being the most fashionable of emerging Causes).
In spite of all this hard work on packaging corporate reputations, public trust in business has declined precipitately.
In January this year, PR consultancy Edelman released its 15th annual Trust Barometer, which revealed that trust in business had declined in two-thirds of the 27 markets it surveyed and dropped below 50 per cent in 14 markets. This is the worst showing since 2008.
The equal and opposite reactions have been visible in the 2011 Occupy Wall Street movement in New York, a photogenic 1960s-style live-in protest.
It didn’t amount to much in terms of more stringent corporate regulation or oversight (instead, most “Occupiers” were put under surveillance). But it did indirectly provide impetus to the debate in the dismal science on inequality, making it a trendy topic in the public domain.
Indian business, on quite a different trajectory from its global counterpart, remains relatively insulated from this kind of backlash.
But the increasing exposure of scams and scandals within domestic business and multinationals operating in India since 2012 suggests that it won’t be long before we catch up with this least desirable of global developments.
