Ethics and Governance â Next global frontier for India Inc

Achal Raghavan
Good ethics and governance are not just "moral" or "compliance" issues. In the l
ong term, they are essential behavioural traits for the organisation that streng
then brand equity and help ensure stable growth.
The Indian economy is on a roll. Organisations are increasingly becoming global.
From a simple "let's export" mindset, companies are moving to the next stage â esta
blishing marketing, manufacturing and distribution networks abroad. Operational
excellence, quality systems, proactive human resource strategies, logistics â Indian
companies have ultimately arrived.What, then, is the next global frontier for I
ndia Inc? Which is the one area that no Indian company can afford to ignore, as
double-digit growth rates become the norm and organisations scramble to globalis
e? It is ethics and governance.
Complex subject
This is a complex subject, requiring more than mere compliance with the laws. It
represents the obligations of a company to all its stakeholders â customers, shareh
olders, employees, suppliers, and the government. In the long term, it is a sour
ce of competitive advantage â to attract more business and more talent.
On the flip side, the effects of ignoring ethics and governance issues can be gr
ave. In the US, irresponsible behaviour by a few corporations and their senior e
xecutives has spawned the Sarbanes-Oxley Act, with its complex requirements with
respect to financial reporting, "sign-offs," and CEO accountability. Board memb
ers have been sent to jail.
Large Korean organisations are now scrambling to execute damage-control actions,
in the wake of governance issues.
All it takes is one headline, and a brand name is shot to pieces.
In this context, Indian organisations â especially the small and medium sized ones â ne
d to be aware of one requirement as they begin their globalisation journey. Not
only do they need to be ethical, they have to be seen to be so. Global customers
will demand to see proof of ethics and governance systems at work. This means d
ocumentation, systems and processes. Just as quality management system certifica
tion and capability maturity models (ISO 9001, CMM and the like) became minimum
requirements for establishing credibility, ethics and governance policies and pr
ocesses will be the "next wave" sweeping the global market place.
Organisations should, therefore, put in place some strong ethics and governance
systems proactively, before market and international regulatory dynamics compel
them to do so. Much work has already been done in this area, and there are many
Indian corporations that follow global best practices.
For the others, this is the time to act. It is much easier to influence the DNA
of the company in the right direction when the company is relatively young. Empl
oyees' attitudes and value-systems are already formed by the time they join a co
mpany; but it is important to set out the company's expectations clearly and enf
orce adherence. Ethics and governance guidelines will help employees figure out
for themselves what actions they should take when faced with ethical issues. Lea
ving it to individual judgment is highly risky for the organisation.
Tackling the issue
While individual organisational approaches may vary, here are some key steps to
be followed in tackling this "next frontier":
Establish an Ethics and Governance Policy for the company, through discussions w
ithin the senior management team; benchmark it with the policies of best-practic
e companies. Write it out in plain, easy to understand language.
Publish the Policy, along with a Code of Conduct for the employees. Illustrate t
he code with typical examples of what the employee should do, when faced with da
y-to-day ethical dilemmas. In other words, demystify corporate jargon, and make
the policy user-friendly.
Communicate the policy widely and repeatedly. Start all meetings with a slide on
it; hold refresher training programmes; get all employees to sign; and make it
part of the new employee orientation.
Encourage dialogue and challenge, in order to improve understanding and "ownersh
ip" of the policy at an individual level.
Come down hard on the cynics.
Set the example from the top; practice the policy consistently and visibly. This
is critical, the ultimate fate of the policy depends on this.
Circulate the policy amongst customers and suppliers. This will make it easier f
or the employees to follow the policy.
Establish an Ethics Hotline which is secure, confidential and available to all e
mployees. Someone senior should handle this hotline, with direct reporting to th
e CEO; alternatively, it could be the CEO's office itself.
Take swift and fair action on reported violations, after due verification.
Review the policy at regular intervals, to make sure it stays current with chang
ing regulatory and market requirements.
Good ethics and governance are not just "moral" or "compliance" issues. In the l
ong term, they are essential behavioural traits for the organisation that streng
then the brand equity and help ensure stable growth.
(The author was formerly Executive Director, Ingersoll-Rand (India) Ltd, Bangalo
re. He can be contacted at badarags@yahoo.com)
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