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Business Ethics: The Next Frontier

for Globalizing Indian Companies

D V R Seshadri, Achal Raghavan, and

Shobitha HegdeNowhere is the fast changing nature of the globalbusiness landscape more perceptible than onthe ethics front. With a spate of recent unethicalbehaviours by large corporations in the Westernworld, especially in USA, their societies havebecome intolerant to businesses that manifestunethical behaviour. Legal and regulatoryframeworks in these countries have been swift torespond through stringent laws such as theSarbanes Oxley Corporate Reform Act.Consequently,most businesses based in these countries have

become extremely risk averse on theethics front. Few of them would like to have anythingto do with any unethical company in anypart of the world. This changed mindset hassignificant ramifications for Indian companies thathave global aspirations. No Indian company thathopes to globalize in any manner can afford

to ignore these changes sweeping the globalbusiness arena on the ethics front.Business ethics encompasses much more thanmere compliance with laws and regulations.


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It is about every individual in the organization actingethically, about creating an ethicallysound working environment within the organization

and about modeling ethical behaviour byleadership at all levels. Research suggests that itmakes good long-term business sense to beethical.For a companys ethics policy to be successfullyimplemented, it is essential that:The code of ethics is clearly communicated toemployees.Employees are formally trained in it.They are told how to deal with ethical challenges.The code is implemented strongly.The code is contemporary.The company leadership adheres to the highest

ethical standards.When an employee gets no clear answers from theorganization while dealing withdecisions that have inherent ethical dilemmas, hetends to chart his own course of action bydrawing on his intuition, conviction, and beliefs, andassessing the pressures of the situation at

hand, putting the organization at considerable risk.Globalizing Indian companies essentially have twooptions. One is to sit back and wait forthe tightening of regulatory and societal screws onthem, forcing them into ethical behaviour in


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a reactive mode. The other approach is for them toproactively herald the new era of businessethics by becoming torch bearers of the new order of

things. It is in the organizations selfinterestto take a proactive posture on the ethics issue, andbe well-prepared for the shape ofthings to come. We also show how this can be doneand what challenges must be addressed forsuccess on this journey.

Executive

Summary

I N T E R F A C E Spresents articles focusing onmanagerial applications ofmanagement practices,theories, and concepts

KEY WORDSBusiness EthicsGlobalizing IndianCompaniesLeadershipCorporate SocialResponsibility

VIKALPA VOLUME 32 NO 3 JULY -SEPTEMBER 2007 6161Business ethics is now, more than ever, becomingan important requirement for doing business in


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the global marketplace. With the global businessinterest in India growing and Indian companiesmaking

aggressive moves in the global arena throughorganicgrowth, mergers and acquisitions, it is imperativethatIndian companies must play and be seen to beplaying

by the rules of the international business world. Inaglobal business scenario that is fast becoming verysensitive to ethical practices and conduct, acompany canignore business ethics only at its own peril. Theshape

of things to come can be understood by reviewing arecent survey of Global 2000 companies that foundthatmore than 35 per cent of them have ethics officers toenforce ethics and compliance management andpromoteethical behaviour in their organizations. Most

Fortune 500 companies have set up ethics offices.Researchsuggests that companies with a clear commitmentto ethical conduct outperform those that do not1,2.Many Indian organizations are under enormous


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pressure to operate, grow, and succeed in a highlycompetitive and challenging global economy. Theyroutinely deal with other companies in the global

marketplace as customers, suppliers, partners orcompetitors.In such an environment, Indian enterprises small, medium, and large that wish to have anyrolein the international arena, need to have sound ethicsandgovernance policies and procedures in place sinceglobalcustomers, suppliers, and partners are increasinglybeginning to demand demonstrable proof that suchethicsand governance processes and systems are at work

inthe companies they associate with in any manner.Justas quality management system certification andcapabilitymaturity models (ISO 9001, CMM, etc.) becameminimum requirements for establishing credibility of

operations of companies during the last twodecades,ethics and governance policies and processes arebecomingthe next wave sweeping the global marketplace.


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Indian organizations that view themselves as playersinthe global arena must think globally not only in terms

of size of operations, quality, cost, and deliveryprocesses,talent as well as best practices; but also in termsof focusing organizational efforts towardsconformanceto acceptable ethical standards3,4,5.For Indian companies competing with reputedcorporations in the global marketplace, sound ethicscanbuild and sustain a powerful positive image. By thesametoken, the presence of an alert media, and instantcommunication

afforded by the Internet and other recenttechnologies, ensure that ethics violations get easilyandquickly exposed6.The definition of success for all enlightenedorganizationstoday includes among other things, ability to

build a brand that inspires trust. Increasingly,companieshave to earn a solid reputation by employing ethicalbusiness practices, if they have to play any role inthe


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global business arena. Additionally, they areexpectedto create value to society by being socially

responsible.Success is no more limited to profit margins andmaximization of profit for shareholders. Companieshavealso realized that they can attract the best talent bybeingseen as ethical. It is a matter of pride for employeestobe associated with such corporations. They feel agreatersense of belonging and loyalty towards suchorganizations.In short, ensuring ethical practices is increasingly

becoming everybodys business in an organization.Highethical standards have come to be recognized as anassetto the company, and conversely, unethicalbehaviour,a liability2.

In this paper, the authors present an action planrelating to ethics, for those Indian organizations thatseek to operate in a globalized world, but whichhavenot yet seriously and formally addressed the issue of


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business ethics. Based on our experience, thisshouldinclude a significant majority of Indian companies.

In our experience, many Indian companies tend tolook at ethics in an ambiguous manner, often hopingthatthings will somehow fall into place on the ethicsfront,and the organization will somehow magically escapeany adverse repercussions on the ethics front. Suchwishful thinking may well be misplaced in todayscontext. Often, there also appears to be hesitancyon thepart of managements of companies to address theethicsissue squarely with the seriousness it deserves. In

somecases, managements feel that by being role modelsthemselves, the issue of ethical compliance for theorganizationas a whole will automatically ensue. Whilethis is a necessary pre-condition for ethicalbehaviour

of the organization as a whole, it is not sufficient toguarantee that all employees will manifest ethicalbehaviour.Our purpose through this article is to direct topmanagement attention to the importance of business


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ethics for the company as a whole, and galvanizemanagements into taking concerted steps tointensely

address this very vital issue. We suggest thatcompaniesstand to gain considerably by proactively moving to-62 BUSINESS ETHICS: THE NEXT FRONTIERFOR GLOBALIZING INDIAN COMPANIES62wards implementing a robust ethics policy to avoidthepitfalls that many companies have experienced in areactionary mode in various parts of the world, suchascompanies in the US that were forced over the lastfew

years to implement the guidelines emanating fromtheSarbanes Oxley (SOX) Act. Our central message isthatproactively positioning themselves as torch-bearersofcorporate ethics will yield much better long-term

resultsto the company than to reactively respond after it iswarranted by legislation. We also present a roadmapofhow this can be done.


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A companys approach to ethics and legalcompliancemanagement greatly influences the behaviours and

attitudes of its employees. Emphasizing mere legalcompliance makes little real difference to thecompanysethical culture. An approach that is holistic, based onorganizational values and self-governance,produces thedesired outcomes required to build and sustain anethicalcorporate culture.THE CONTEXT

As individuals, most people treasure a set ofpersonalcore values that are generally in line with time-

honouredethical principles. However, translation of thesepersonalcore values to practical situations at work is notautomatic, for frequently the situations to whichemployeesare exposed in their work situations are fairly

complex from an ethical perspective. Often, theemployeemay be subjected to various pulls and pressures.Pressures to demonstrate that one is in line withthe


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team, the tacit rule in many organizations of dowhateveryou have to in order to satisfy the client, a strong

obligation to obey the bosss command knowing wellthat it could sometimes be illegal or unethical, theperception that performance at all cost is whatreallycounts, stiffening competition, pressures to meetsalestargets and goals, fighting internal politics, etc., arebuta few of the organizational compulsions that forceindividualsto respond in a variety of ways, often providing

justification for taking unethical actions. In thesesituations, the best possible alternative is not

obviousas the situation entails both complexity andambiguity.How then does one deal with these so-called ethicaldecisions? Before dealing with the answer to thatquestion,it is important to recognize that ethical decisions

typically involve choosing between two options: oneweknow to be right and another we know to be wrong.Badaracco (1998) suggests that ethical decisions donot


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involve choosing between the right versus rightoptionsor the wrong versus wrong options. Instead, they

involvechoosing between the right versus wrong options7.In our discussion of ethics, we specifically excludemany situations which employees may face in theirdayto-day work, that while challenging to address, do notdeal with fuzzy, gray areas where choices betweenrightand wrong have to be made.Thus for instance,situationsdealing with incompetence of a boss oridiosyncrasiesemanating out of the peoples sense of insecurities,

egos,etc., are excluded from the scope of our discussions.Inmanagerial roles, there are decisions that are clearlywhite and others that are clearly black. Here again,thereis no ambiguity for the manager. For instance,

companiesare expected to do all it takes to produce qualityproducts/services, as cost effectively as possibleand


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deliver them responsively on time to chosencustomers.These fall in the realm of white areas on the ethics

spectrum, and there is no ambiguity for a manageronwhat needs to be done to navigate through suchsituations.

At the other extreme, there are clearly what maybe labeled as black areas, such as trying to get akeytechnologist of a rival firm killed for gainingcompetitiveadvantage, which are illegal, let alone beingunethical.Once again, a manager needs no aids to navigatethrough

these black terrains, since any behaviour in theblackzone is illegal and unacceptable. The real problemsarefaced in the gray areas between these twoextremes. Thefuzzy middle ground is where most managers get

stuck,and this is where the company needs to step inthrougha well-thought-out ethics policy that can providepractical


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help to the manager. Through several examples inthe following, we illustrate the type of pressures thatthese gray areas could put on managers, particularly

those at the middle and the operating levels, unlesstheyhave a navigational compass facilitated by thecompanysethics policies.Case 1

Ashok is the Purchasing Manager in a company. Hehasto make a choice between three suppliers, and hasalmostdecided on one of them, which he thinks would be inthebest interest of the company. He has a son, an avid

cricketfan, who has made frantic attempts through hisfriends towatch a cricket match between India and Australia tobeplayed soon in their city. One of the suppliers who isunlikely to get the order, comes to Ashok and tells

him thathe has received two free pavilion tickets for the verysameVIKALPA VOLUME 32 NO 3 JULY -SEPTEMBER 2007 63


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63cricket match. The vendor suggests that since bothhe and

his wife have no interest in cricket, they would behappyif Ashok could use those tickets, as otherwise, theticketswould go waste. Should Ashok take these twotickets, anduse the opportunity to treat his son to a pavilion viewofthe match, rubbing shoulders with the gamesgreats? It isquite possible that the vendor has fabricated thewholestory, with an ulterior motive of influencing Ashok to

favour his company in the vendor selection process.SinceAshok has a strong personal ethical compass, hecouldrationalize that the act of accepting the tickets wouldnotinfluence him in any way in his decision. Watching a

cricket match is a personal choice and has nothingto dowith his companys work. On the other hand, heshould


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also consider the possibility that his company maylaterdiscover that the tickets were gifted by the vendor.

Whatwould such a discovery do to Ashoks credibilityinsideand outside his company? What would it do to hiscompanys reputation of being a fair customer?Eitherbefore or during the process of such discovery byhiscompany or others, Ashok may decide to hastilywrite outa cheque to the vendor, paying him the price of thetickets,to keep his conscience clean. Would that be seen

as acover-up?Case 2

John is the Purchasing Manager, sent overseas toanoriental country to evaluate a vendor for purchase ofexpensive equipment. During the meetings with the

supplier, he is wined and dined, and at the end of afarewell dinner, he is presented with an exotic,pricelesspiece of art, and told by the CEO of the supplier firm


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that the gift is being given as a token ofappreciationto John. He is requested to accept this gift as a

mementoof his visit to the vendors country. He is requestedtotake this gift home and give it to his wife. On the onehand, Johns personal values suggest that he shouldnotaccept the expensive gift. On the other hand, Johnwasgiven some briefing by his friends before he left forhistrip, about how big company meetings in orientalcountriesare conducted and how his not accepting a gift

would be seen as an insult. John assesses that thegiftcould cost in excess of USD 10,000. What shouldJohndo?Case 3

Hashim is the Sales Manager of a company and has

animportant supplier meeting at Indore. He is visitingIndore for the first time. He has no friends there. Hisflight gets him to Indore early in the morning whilethe


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meeting with the supplier is scheduled at 11 a.m.Thesupplier has a ten-year relationship with Hashim.

Thesupplier firms CEO proposes to send his personalMercedescar to pick Hashim up and bring him to his farmhouse for a morning of relaxation before the formalmeeting. The CEOs argument is that otherwiseHashimwould not be able to make it in time for the meetingatthe companys Head Office, some 70 km from theIndore

Airport. Hashim wonders whether his own companyextends similar normal courtesies to its own

customers.What should Hashim do? On whom does the onusofethical behaviour lie? On the person offering thesenormalcourtesies, or on the person receiving them?Case 4

Rashmi is the Sales Manager of a highly respectedsupplierfirm that is seeking a very critical make or breakorder


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from one of its important customers. Rashmi isvisitingthe customers Purchase Manager, whom she

knows formany years. During their meeting, the PurchaseManagergets a call from his CEO, asking him to meet himfor a few minutes. Profusely apologizing for havingtoleave the meeting with Rashmi, the PurchaseManagerpromises to be back in a few minutes. After the doorcloses behind him, Rashmi realizes that she is allalonein the Purchase Managers cabin and sees that thefile

with all the competitive information is on the table,leftopen, as the Purchase Manager left in a hurry. Whatshould Rashmi do? She has the option of peepingintothe file, and learn that her companys quote is about5 per cent more than the competitors price offering.

Thisvital piece of information would enable her to drophercompanys offering price through a revisedcommercial


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offer, surely guaranteeing that she gets the order.Onthe other hand, if it later became known that her

pricewas indeed dropped because the competitors pricequotes leaked, her long-term acquaintance, thePurchaseManager, who left his cabin trusting her, could be indeep trouble, not counting the damage to her ownandher companys reputation. She also had to keep inmindthat business was getting hard to come by, and thisordercould keep her company busy for many months tocome.

In all these cases, it is easy to recognize that themanager concerned is on a very slippery ground.Thesituations are neither white nor black, but in thezone in between. These are not situations involving64 BUSINESS ETHICS: THE NEXT FRONTIERFOR GLOBALIZING INDIAN COMPANIES

64academic debates. They are situations faced byindividualmanagers at various levels in companies day in


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and day out. It is in these types of situations thatcleararticulation and proper implementation of a clear

ethicalpolicy could help a companys employees to factor inthe important ethical dimension into their decisions.NEED FOR GLOBALIZING INDIAN

COMPANIES TO EVOLVE A FORMAL

ETHICS POLICY

Emerging Global Business Ethics Climate

Organizations being accused of or investigated forethicalviolations is not uncommon any more. Events inmany developed nations have shown that high-profilecompanies can, due to unethical conduct on the part

ofthe leaders or the managers of a company, bereducedto bankruptcy. Ethics is an issue that has becomeveryimportant to corporations in many countries, thoughit

was the US corporations like Enron, Tyco, andWorld-Com that brought the issue of violation of ethics tothe


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global centrestage. These instances haveheightenedeveryones awareness of unethical business

practices.Being players in a global business environment,corporationsworldwide have come to acknowledge increasinglythe importance of business ethics and of the needfor doing business in a fair manner at home and inforeign lands. While the perspectives of culturallydiversepeople across countries differ, the need to executebusiness based on ethical practices is fast becominguniversal8.In the wake of the multitude of corporate scandalsin the US, the US Congress enacted the Sarbanes-

OxleyCorporate Reform Act (SOX) in the year 2002. SOXdrawsattention towards serious government oversight oncorporategovernance in companies in the US. SOX mandatesCEOs and CFOs to personally review each of the

companys quarterly and annual financial reportsandcertify that financial figures stated thereof are notmisleadingon account of any material omissions, and that


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all results of the companys operations andfinancialshave been represented fairly. SOX comes down

heavilyon companies that get caught on account of falsefilings,destruction and tampering of documents, andviolationof security law. As per SOX provisions, individualsandcompanies that are implicated in issues of ethicalviolationscan face criminal penalties for the offencescommitted.SOX has indeed caught the attention of CEOs,CFOs, and the boards of directors of American

companieslike never before9.In the post-SOX era, the US multinationalcorporationshave taken an even more detailed approach tocorporate ethics, and have been developing ethicalstandards

for a global environment. SOX has had a rippleeffect across the world owing to businesses gettingincreasingly globalized. When working with theirsubsidiariesor joint venture partners overseas, the US parent


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company ensures that the overseas outfits havesystemsand processes in place to avoid ethical

shortcomings.Increasingly, these MNCs are expressing concernnotonly for ethical conduct within their ownorganizations,but also in organizations they do business with.Theyhave come to understand that with the screwstighteningon wrongdoers, tolerance for anything less thanhighestlevel of ethical behaviour can destroy thecorporation.

Similar legislations are becoming the norm in othercountries. From a societal perspective, intolerancetowardsfrauds and ethics violations are on the rise in mostcountries. Increasingly, executives involved in ethicsviolations have been held to account, have stoodtrials,

and have been convicted and imprisoned, dismissedorforced to resign.In the above context, it is important for Indian


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corporations to understand that they can no longeraffordto ignore the issue of business ethics. In the

emergingscenario, it is not enough if the leaders themselvesareethical. Competing to win in the global marketplacewould require them to institute ethics andcompliancepolicies that are of globally acceptable standardsandbuild an ethical corporate culture by making ethicsandvalues a prominent part of the leadership agenda.In this scenario, Indian companies have animportant

choice to make. Each companys leadership shouldask itself: Do we need an Indian version of SOX toforceus to ethical compliance in a reactive mode? Suchleadersmay argue: What is the need for us to act now? Letus wait and see what happens. If and when

regulatorypressures for ethical business mount, we will getlegalcounsel to fix that issue for us, as we have done onmany


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other issues. An alternate response could be:Shouldwe proactively position ourselves as leaders

heraldinga new era in the ethical business regime? Sagecompanieswould do well to study what has happened on theglobal stage in this regard. They would ask: Whatcanwe learn from events surrounding the formulation ofSOX in other countries, and consequences to thoseVIKALPA VOLUME 32 NO 3 JULY -SEPTEMBER 2007 6565companies that indulged in widespread and rampantunethical behaviour? Through such investigations,

theywill come to realize that there is significant brandequityenhancement that results from taking a proactivepostureon the ethics front. They would learn that similarwaves swept corporations on other fronts, such as

quality,green business, etc. In all such instances,companies thattook proactive steps strengthened their leadershippositions.


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Proactive leaders would not be eager to reinventthe wheel. Instead, they would intuitively realize thatit is in their best interest to jump-start the ethics

revolution,akin to the manner in which India as a nation

jump-started the telecom revolution, moving fromminimalphone coverage to extensive telecom coveragethrough mobile telephony, largely bypassing thelandlinephase in the process. They will realize that thewholeissue of business ethics is not restricted to moralrighteousness;instead it is about enlightened self-interest.The Business Ethics Imperative: Ethics as a

Proactive Competitive StrategyWhat choices do top managements of companieshavewith regard to instilling ethics into the working oftheirorganizations? At one extreme, leaders couldchoose to

run their businesses expecting highest levels ofethicalpractices at all levels in the company. At the otherend


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of the spectrum, leaders could signal eitherambivalenceor apathy to the subject of business ethics. Of

coursebetween these two ends, there are a variety ofchoicesfor a companys top management to implement. At afundamental level, the company either adheres toethicalpractices or does not, and thus the two ends of thespectrum are mutually exclusive. The leadershipcouldsignal or even expect that it is okay for theemployeesto manifest mercenary and ruthless behaviour. Suchsignaling implicitly legitimizes unethical practices.

Theirony is that in the short-run, such an organizationcouldbe greatly successful, although there can be noguaranteeto its long-term sustainability. Alternately, theleadership

could choose the more arduous ethical path. Thiswould require transparency, accountability, andconsistentlyhigh ethical practices at all levels10. The primary


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aim of our article is not to be prescriptive andnormative,but to present a navigational map, outlining issues

thatmust be addressed by a leadership team that isdesirousof getting their organization to embark on an ethicalpath, and suggesting ways and means of tacklingthem.Good ethics and governance are not just moralor compliance issues. In the long term, they areessentialbehavioural traits for the organization tostrengthen its reputation and its brand equity, whichinturn result in sustainable growth. The ethical DNA

ofan organization is just as important as its sales pitch.Not only must the company have a strong ethicalfoundation,but it must also be seen to be ethical. Havingethics codes and policies and implementing themtells

customers, vendors, partners, investors, and otherstakeholders what to expect when interacting andenteringinto a relationship with the company, thus helpingto build confidence and trust among them4,11,12.


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Effective, living statements of ethics, anchored inthe strategic vision of the organization and businessphilosophy of its leaders and its employees, can

differentiatea company from competitors. The InternationalBusiness Ethics Institute confirms that a companywitheffective business practices enjoys considerablemarketplaceadvantage since corporate practices and values arefast becoming primary considerations in thedecisionmakingprocesses of increasingly larger number ofinternationalfirms and customers that the company maybe associated with. Market participants often make

judgments about the ethical practices and behaviourofcorporations that they deal with in the marketplace,preferring to do business with companies that theycantrust. A seemingly innocuous slip in the ethicalconduct

could result in customers or partners choosing todealwith more ethical companies, often seekingreparationthrough the courts, media, and other channels. Thus


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there is unequivocal evidence to suggest that in thelongrun, businesses stand to benefit from a reputation

foracting with integrity12,13.Infosys Technologies is a good example of acompanythat validates this business hypothesis. It hasdemonstrated to skeptical Indians that businessescanbe made phenomenally successful, that too in asinglegeneration, by employing legitimate and ethicalpractices.The company believes that it is essential to identifyvalues, articulate them, and strengthen them

throughaction. This belief has paid off for the company intermsof strong financial performance14. The ethicalfoundationin the company was undeniably laid by thecompanys

founders. Fortunately, for any Indian company thatseeksto tread the ethical path, there are several similarrolemodels from whom they can learn.


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As difficult at it may be to quantify the benefits ofethical actions to the companys bottom line, a study66 BUSINESS ETHICS: THE NEXT FRONTIER

FOR GLOBALIZING INDIAN COMPANIES66conducted by the Institute of Business Ethics in theUKbetween 1999-2001 confirms that performance ofcompaniescommitted to ethical conduct is far superior tothose that do not practice business ethics. Theindicatorsof business success such as economic value added(EVA),market value added (MVA), price/earnings ratiovolatility,

and return on capital employed (ROCE) ofcompanieswith ethics codes were much higher than thoseof companies that did not conform to ethicalpractices15.In addition to superior financial performance, highstandards of ethics bring significant business gains

interms of customer loyalty, investor trust, building aclean image and reputation, strong brand equity,and


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stable growth. It induces other business associatestobehave ethically as well, contributes to employee

commitmentand loyalty, and promotes positive behaviourwithin the organization. Business ethics caneffectivelybe deployed and leveraged as part of the companyscompetitive strategy, to attract more business andmoretalent16.Consequences of Not Having An Ethics Policy

For a company that does not have a well-definedethicspolicy or implements a well-articulated ethics policyin

a lackadaisical manner, the consequences could bedisastrous,as the following example demonstrates17,18. Sadly,such occurrences are not uncommon.In April 2005, an organized and systematic plot tosiphon money from the bank accounts of four highnet

worth foreign customers of a major MNC bank washatched by the employees of an India-basedcustomerservice centre of a leading BPO company thatoperated


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the call centre for the MNC bank. Three of thecustomerservice executives working at the BPO company

wereenticed into acquiring and parting with thepasswordsand personal identification numbers of four customeraccounts of the bank by a group of formeremployeesof the BPO company who were the masterminds ofthefraud. The information so obtained was used totransferthe customers money, amounting to severalhundredsof thousands of US dollars, to bank accounts

openedunder false names. The fraud came to light when theaffected customers of the bank alerted the bankaboutthe missing funds. The bank then traced thewithdrawalsto the BPO companys customer service centre. The

CyberCrime Cell of the police in India investigated the plotand the persons involved were arrested on chargesoffraud.


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Considering that what happened in this situationwas the work of unethical employees, there is alsothe

shared responsibility of the company for this majorunethical act, which cannot be overlooked. Despitethecall centre being BS 7799 (a security certification)andCMM Level 5-certified (high-end quality certification),unethical behaviour by some of the employees stilloccurred. While one might argue that such incidentsarefew and far between, the adverse impact on thecompanyin particular and the country in general can be lethal.What this example highlights, however, is that it is

essential for companies to pay a lot of attention toethics,and not leave it to chance or happenstance.Moreover, rarely do ethical shortcomings of a loneindividual fully explain corporate misconduct.Corporatemisconduct usually involves several others, either

in an active or a passive way, and reflects thevalues,approaches, and principles that define anorganizations


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operating culture. Thus, ethics has everything to dowithmanagement, and the organization is as much

responsiblefor an individuals wrong-doing as the individualhimself. Organizations that fail to institute robustsystemsthat facilitate ethical conduct share responsibilitywith those who benefit by contriving and executingunethical acts. Undeniably, the onus to create aculturethat promotes ethical behaviour lies squarely withthetop management of an organization19.TACKLING THE NEXT FRONTIER: WHAT

INDIAN COMPANIES NEED TO DO

From our discussions above, it is clear that businessethics and compliance is the next frontier for Indiancorporations to address as they become increasinglyinvolved with worldwide markets. Strangely, ourexperiencesuggests that awareness of this issue is still at avery nascent stage in many Indian companies.

Indiancorporations would need to build trust in theirinternationalstakeholders through committed action on the


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ethics front. This would involve setting upcomplianceprogrammes to a code of ethics to counter unethical

behaviour and create an ethical businessenvironmentwithin the organization. This is also a time for Indiancorporations that already have elaborate ethicscodesand policies in place, to review and renew theirethicsefforts, and implement benchmark ethical practicessuitedto the global industry17.Implementing a strong ethical basis of working isrelatively easier for a younger company, when itsDNAV

IKALPA V

OLUME 32 NO 3 JULY -SEPTEMBER 2007 6767is still being moulded. For more establishedcompaniesthat did not have a well-implemented ethics policy inthe past, it takes leadership and hard work to usher

inan ethical organization culture. While this is achallengingtask, it is not insurmountable. While one might argue


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that the attitudes and value systems of employeesarealready formed when an employee joins a company,

ethics and guidelines help employees to know whatthecompany expects of them on the ethics front, whatbehaviours are acceptable and what are not.Ethics is a complex subject, requiring more thanmere compliance with the laws. It represents theobligationsof a company to all its stakeholders customers,shareholders, employees, suppliers, partners,society atlarge, and the government. While individualorganizationalapproaches to tackling the challenge of business

ethics may vary, an approach that is embedded inwellarticulatedorganizational values stands a much betterchance of being successful. Such a holisticapproachshould explicitly spell out how ethics must beimplemented

in the organization, the role of leadership, andthe role of individual employees in fostering aclimatethat encourages exemplary ethical behaviour.Components of a Companys Ethics Policy


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The first phase in building an ethical corporatecultureis to develop a formal ethics programme that

includesthe following features4,12,20,21,22:The code of ethics must have statements that arerelevant and that define expectations regardingemployeesbehaviour that is needed to guide them in theirdayto-day decision-making. The code of ethics must bederived from the organizations core values, which inturn must be derived from the core purpose andbroadmission of the organization, as well as the beliefs ofthe

founders/key top managers of the organization.Ethics statements must not be created solely ascompliance documents, rulebooks or public relationsmaterial. Issues related to legal and regulatorymattersneed to be addressed, but more crucially, ethicsstatements

must communicate the importance of ethicalbehaviour and the companys core values such asintegrity,trustworthiness, honesty, and transparency.


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Ethics statements must be in plain, easy tounderstandlanguage. Generic ethics statements that read like

they belong to any company anywhere do notresonatewith employees. Including things that are unique tothebusiness would make the statements more relevanttothe organization. Standards must be laid out thatlucidlystate what can and cannot be done by anemployeein a given situation. However, providing a rule foreverysituation would be virtually impossible and therefore

the employee must be allowed to use his personaljudgment,which must be consistent with the ethical standardsof the organization.In matters where temptation to behave unethicallyis the strongest, the ethics codes must presentspecific

direction about ethical behaviour. For example, ifbriberyis unacceptable, then the code of conduct mustclearly


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describe situations that would be consideredunethicalin the company (such as offering bribe to public

officials,or bribing an employee of a customer firm, etc.). Itmustcomprehensively describe situations that would beconsidered a violation of the code of ethics.Specifyingwhat an employee must do when he confrontsethicaluncertainties, encounters ethical misconduct, orwhenhe is being pressured into committing ethicalmisconduct,are an essential part of the code of ethics. Since

it is the top managers of the company who definethecode of ethics, they must make definitive and oftentoughchoices on what is acceptable and what is notacceptable.Finally, the code of ethics drawn up must be

benchmarked with the codes of ethics of bestpracticecompanies in the world on a continual basis.Steps that Indian Companies Must Take to

Develop An Ethics Policy


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Establishing a code of ethics : In most Indiancompanies,ethics is seldom formally addressed as an

important management agenda. It is dealt with ona case-to-case basis as and when problems arise.While instincts alone may have sufficed in the pastto address ethical issues, in todays complex anddemanding global business environment, awelldefinedcode of ethics, as described above, acts asa behavioural compass for employees, helping themto make decisions within the business, legal andethical boundaries. Communicating the code : While drawing up thecode of ethics is a significant task in itself, it justmarks the beginning of the journey to build an

ethical culture. The organization must haveprocessesto effectively communicate, implement, andupdate its code of ethics. At a minimum, thisincludesthe following steps:- Making sure that every employee has a copy

68 BUSINESS ETHICS: THE NEXT FRONTIERFOR GLOBALIZING INDIAN COMPANIES68of the code of ethics or access to the same.- Ensuring there is no ambiguity in understanding


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the code of ethics. The document shouldhave adequate number of diverse examplesabout the codes deployment and utility.

- Conducting training programmes to allowemployeesto review the codes provisions, to understandhow the provisions apply to the individualsspecific job responsibilities, to informthe specific behaviours and decisionmakingprocesses the organization would likethe employee to use when confronting ethicalchallenges, etc. Ultimately, training efforts mustresult in employees feeling an increased levelof confidence and comfort when actually havingto make ethical business decisions.- Communicating the policy repeatedly: Starting

all meetings by highlighting the code of ethicsis a good way to bring ethics to the centre stageof the organizations working.- Creating a habit of routinely talking about ethicsat all levels: If an employee or a team in thecompany chooses to do something right eventhough it is difficult to do so, capturing such

instances and using them as living examples toillustrate desired behaviour goes a long way inreinforcing what is an ethically acceptable behaviourin the organization. Using organizationalnewsletters to communicate such instances


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and stories of ethical conduct to everyone inthe company is another powerful tool to reinforceethical behaviour in the organization.

Going public with the ethics statements : Goingpublic with the companys code of ethics woulddemonstrate to employees the commitment of theorganization towards its stated values and ethicalstandards. It would enable customers, vendors, andother stakeholders to know what to expect wheninteracting with the companys employees, makingit easier for the companys employees to follow thecodes. Moreover, circulating these codes helps tobuild trust and loyalty among various externalstakeholders such as suppliers, customers, partners,governmental agencies, etc., and differentiatesthe company from its competitors.

Establishing robust processes for handling ethicalissues : Establishing and making widely knownprocesses which the employee can use for bringingup matters of ethics for resolution are an essentialpart of ethics implementation. This includes takingswift and fair action on reported violations, afterdue investigation of the allegation. The processes

should be transparent and encourage an on-goingdialogue to enable individual employees tounderstandthe ethics policy better and help them to take


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ownership of the same. Mature managementprocessesthat allow employees to challenge the policies

in a positive spirit to ensure their continuedrelevance through periodic review and reevaluationare essential. At the same time, there should beprocesses to track and come down hard on cynics. Providing support structures : Mechanisms forreportingviolations such as ethics hotlines and mailboxesmust be instituted. The reporting mechanismmust be secure, confidential, and available to allemployees. Someone senior with high credibilityshould handle this hotline, with direct reporting tothe CEO; alternatively, it could be the CEOs officeitself.

Reviewing the codes : It is essential to review theethics codes at regular intervals to meet thechangingneeds of the organization, marketplace, andregulations.Business Ethics and Corporate Social

Responsibility

Corporate Social Responsibility (CSR) is an aspectofbusiness ethics that has assumed significantimportance


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in the age of globalization and expandingmarkets23. Themorally-influenced attitudes of consumers in markets

have forced many multinational corporations toredefinetheir definition of social values and rules of theirbusiness.There is an increasing realization that corporationsare created by the society and that they must givebackby serving the society and not merely by makingprofitfrom it. Thus for instance, environment protectionandsupportive social action have become importantfactors

that determine a companys success in internationalaswell as in many countries domestic markets.Corporationsthat shirk responsibilities towards the society, theenvironment, and other stakeholders that havecontributed

to the growth and prosperity of the business, areviewed as not ethically-driven by the society atlargeand also by the international business community.


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New age corporate leaders are replacing thebusinessphilosophy of maximization of profits with op-

VIKALPA VOLUME 32 NO 3 JULY -SEPTEMBER 2007 6969timization of profits by shifting their business focusfrom accountability to shareholders toaccountabilityto stakeholders (including employees, customers,communities,etc.). The growing focus on Corporate SocialResponsibility mandates that these stakeholdershave aright to expect accountability and transparency aswell

as social and environmental investment fromcorporationsas these corporations have survived and flourishedbecause of the customers who buy their products,theemployees who work for them, the communities whosupport them, the environment that has provides

naturalresources, the shareholders who invest in theirstocks,and the partners and suppliers who work with them.

A corporation that partners with non-government


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organizations and government organizations tosolvesocietal problems (such as substance abuse,

educationof economically backward sections, human rightsissues,unemployment, child labor, etc.) and environmentalconcerns (such as recycling of material, properhandlingof industrial waste, effective pollution abatement,effectivelyaddressing health hazards, etc.) would not onlyhelp society at large but also helps itself to build itsreputation and long-term brand equity. It builds upconfidence and trust in the marketplace. It increasesthe

visibility of the organization. Corporate SocialResponsibilitycreates benefits for a corporation in the areas ofmarketing, shareholder value, human resources,innovation,and many more.In the above context, it is essential for Indian

corporationsto be seen as more responsible by integratingsocial issues with business practices. Globalcustomers,


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companies, and investors are demanding increasingsocialresponsibility and community involvement from

corporationsthey deal with. They prefer to build relationshipswith corporations that are committed to importantsocietal and environmental causes. Theirexpectationson Indian corporations that they deal with is that theynot only conduct their business ethically but alsoensurethat the business effectively addressesenvironmentalconcerns and social responsibility issues. IgnoringCorporate Social Responsibility would meanendangering

business success in the global marketplace. It isunlikely that a company can be ethical while notmanifestinga high degree of social and environmentalresponsibility.Corporate Social Responsibility and responsibilityto the environment are themselves large and

important issues for any company today. While theyareintimately connected to ethical behaviour oforganizations,the focus of our discussion is corporate ethics.


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ENABLERS FOR EFFECTIVE

IMPLEMENTATION OF AN ETHICS POLICY

We now discuss the three vital enablers for effective

implementation of an ethics policy in a company.Thefirst relates to the organizational culture necessarytoimplement business ethics. The second deals withthecentral role of the leadership in the organization,comprisingthe top management. The third relates to the keyrole of individual employees that is essential to makethe ethical journey of the company a success.The 3 Rs24: Prerequisites for a Company to

Embark on the Business Ethics Journey

The 3Rs, which are the prerequisites for businessethicsare Respect, Responsibility, and Results. Buildingthesethree factors into the organizations culture wouldhelpto align the behaviour of its employees in the ethical

direction. Conversely, it is unlikely that anorganizationcan manifest extensive ethical behaviour in theabsenceof these three Rs.


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Respect : People, organizational resources, and theenvironment (internal and external) must be lookedupon with respect. Examples of such behavior

include treating all stakeholders with dignity andpoliteness, making effective use of companyresourcesfor business purposes only, drawing a cleardistinction between company and personal assets,abiding by the law, and refraining from abusing thenatural environment in which the company operates. Responsibility : Demonstrating responsiblebehaviourtowards stakeholders and towards oneself isa prerequisite for business ethics. Examples of suchbehaviour include delivering competitively pricedproducts and services of high quality at the right

time, working together to achieve the organizationsgoals, and meeting performance expectations. Results : Employees need to be encouraged toachieveresults by employing means that are ethical.Role of the Leader in Business Ethics

Many recent reported cases of unethical behaviour

onthe part of the leaders of companies have resulted inputting the spotlight squarely on the ability of theCEO


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and other senior executives of the company to run acleanbusiness. No amount of ethics training programmes,

70 BUSINESS ETHICS: THE NEXT FRONTIERFOR GLOBALIZING INDIAN COMPANIES70codes of conduct, mission and core valuestatements orethics manuals would help create or maintain thedoit-right climate within the organization, if the leaderhimself is engaged in ethical transgressions or doesnotact within ethical boundaries.When leadership at the top is unethical, it provesdisastrous for the business, particularly in the long

term.It invites legal problems, with the business having toexpend huge amounts of money in lawsuits,regulatoryfees, lawyers fees, settlement fees and the like. Inunethical leadership, the means that leaders adoptto

attain the desired results is often questionable.Theseleaders put personal needs before that of theirorganizationsand employees. They do not exercise leadership


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in the interest of the organization, and have little ornoself-control. Unethical leadership infringes upon

commoncodes of decency and good conduct. It does notdifferentiate between the right and the wrong. Itcontributesto low employee commitment, satisfaction, andcomfort. It often leads to an organizationalenvironmentthat encourages employees to rationalize their ownunethical behaviour and become indifferent to themorallegitimacy of the business decisions and choicesthatthey make. In short, ethics gets sacrificed in the face

ofbad leadership25.For employees to act on the basis of strong ethicalprinciples, the organization must be led by a chiefexecutive and other top managers who see thevalue inconducting business within legal and ethical

boundaries.That they are willing to accept ethical behaviouras a constraint or a cost must be visible for everyoneto


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see. The leadership must walk the talk. Thefollowingexample illustrates how the chairman of a large

Indiansoftware firm practices business ethics, and throughhisbusiness decisions, strengthens the ethical fibre oftheorganization. The resulting organization culture thathehas built over the years encourages exemplaryethicalbehaviour in the company.

A couple of years ago, a large importedconsignmentof one of the groups companies landed at the

Mumbai port and was due for customs clearance. Itwasbelieved that the import duty rates on the importeditems would go up on account of the likelihood ofhigherduty rates to be announced in the Indian budget thefollowing day. Attempting to cash in on the situation,

concerned officers in the customs department madeaproposal to the companys managers that theywould


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speedily clear the companys consignment at thelowerapplicable customs tariffs, in exchange for a

relativelysmall monetary consideration. For a moment,managersof the company who were involved in the customsclearance were tempted to consider the proposal.However,the ethical policy of the company necessitated thatthey should refer all such matters to their seniormanagers.The matter was actually taken right up to thechairman. His stance on the issue was unambiguousandsimple: Go and plead with the customs officials

unfailinglyevery day to speed up clearance of our importedconsignments purely in the normal course. Do notpartwith a single rupee. If your efforts do not succeed,donot lose heart. If at the end we have to pay a much

higherduty, never mind. We will pay it. But make diligentefforts to clear our consignments only in the normalcourse26.Without doubt, the single biggest determinant of an


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organizations ethical DNA is the behaviour of theleadershipto ethical issues. Often, leaders blame the behaviour

of people in the organization on an unethicalexternalenvironment without recognizing their ownresponsibilityin creating, deploying, and maintainingsystems that promote an environment of high ethicsinthe organization. It is universally acknowledged thatthemanner in which the chief executive exercises moral

judgment has more impact on employee behaviourthanany written policy. The ultimate responsibility for

bringingabout an organization culture that is sensitive toethical conduct rests with the leader at the top. Thisprovides the necessary signaling to leaders at everyother level in the organization to themselves serveasrole models to their subordinates.

At final reckoning, the organizations leaders areresponsible for transmitting an unambiguousmessageof how things are done in the organization. Theleader


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has no option but to behave in an ethical andtrustworthymanner if he seeks to establish an ethical culture in

theorganization. To cause others in the organization toactethically, the leader must first begin with him. Thecorebehaviours of a leader required to establish hiscredibilityand thereby build trust and ethical conduct in theworkplace include the following27: Integrity : The leader must be honest, humble, andopen. He must have the courage to act inaccordancewith his own deeply held ethical values as well as

the organizations core values, which arethemselvesbased on a strong ethical foundation. There mustbe no gap between his intent and behaviour. WhenVIKALPA VOLUME 32 NO 3 JULY -SEPTEMBER 2007 7171

the leader is true to his principles and beliefs, actswith humility, and is open, he creates no room forsuspicion, and will be able to inspire trust andethical actions from others in the organization. Intent : The leaders motives and agenda must be


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unambiguous with a clear focus on benefitinginternaland external stakeholders. When employees

are wary of the leaders hidden agenda or theysuspect that the leader is not acting in theorganizationsbest interest, using ethical principles as hiscornerstone, they become skeptical abouteverythingthe leader says and does. This fosters mistrustof employees in the leader and they are less inclinedto act morally themselves. Capabilities : The leader may have integrity andgood intent, but if he lacks capabilities in terms ofthe ability to establish, grow, extend, restore, andcontinually reinvigorate ethics in the organization,

his efforts to build the desired ethical culture willfail. Results : The leader must create a track record forachieving results by employing ethical means. Whenhe does not accomplish what he is expected todeliverin terms of the organizations results using the right

methods, it weakens his credibility and employeesbecome cynical about the possibility of building anethical work environment.When the leader has integrity, intent, is capable, and


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produces results, his actions send powerful signalsaboutwho he is and what he expects of others in the

organization.He acts as a role model for principles of behaviourthat he espouses. When employees observe thatleaders are ethical, they feel less compelled tocompromiseon ethical standards. Acting ethically for thembecomes no longer a burdensome constraint.Instead, itbecomes a part of their day-to-day operations andtransactions.Role of the Leader in Integrating Ethics into the

Organizations Culture

As a leader, one may be successful in

demonstratingcredibility, drawing up effective ethics policies andcompliance standards, with a view to make peopleactwithin the ethical boundaries. Often however,leadersfail in making ethics an integral part of the

organizationsculture. For this to happen, the leader must createpositive organizational symbols and must modelethicalbehaviour through visible action.


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Creating Organizational Symbols

Symbols are those objects, actions or ideas thatconnote

and convey essential paradigms to everyone in theorganization. It has been said that actions speaklouderthan words and this holds true for symbols too.Symbolshave the power to convey the desired paradigmsmuch faster and more explicitly than words.Examplesof negative symbols include: managersmisrepresentingsales figures as a response to contextual forces anda CEOwho commutes in an expensive car and lives in a

plushbungalow paying hefty rents at company expensewhilepeople are being laid off. Such behaviours have adetrimentaleffect on efforts to implement organizationalethics. Positive symbols include the decision of a

seniorexecutive to do a statewide recall of the companysproduct to avoid further damages to health ofcustomers


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from product tampering and a senior executivebackingout of the bidding for a huge project of a client

becausethe deal was not in tune with the companys valuesystem. In whatever form, symbols become valuedasillustrations and images of what is right or wrong intheorganization. The leader has the responsibility tocreatemore positive symbols that are in line with theprinciplesof ethics27.Modeling Ethical Behaviour

As a leader, one has greater responsibility than the

average employee to live up to ethical standardsandprinciples. However, it is not sufficient for the leaderalone to be principled in order to manifest goodethicalbehaviour among the employees. This would onlycommunicate

to the employees about what their leader is.While they may applaud the leader for his ethicalconduct,this by itself does not tell them what they should


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do. For employees to understand what they shoulddo,the leader must additionally convey the ethics

messageto the organization through his actions anddecisions20,28,29.Doing the right things and conveying it to others :

A leader may be the ethical person the positiondemands and may do the right things, but thechallenge also lies in conveying the valuesunderlyinghis ethical actions to the employees. Onlywhen these values get conveyed to employees dothey view the leader as ethical, understand who hereally is, and what is important to the organizationfrom an ethics standpoint. Employees make

conclusionsbased upon their leaders actions and believethat whatever the leader does is the right thing forthem to do as well. Therefore, the leader must set72 BUSINESS ETHICS: THE NEXT FRONTIERFOR GLOBALIZING INDIAN COMPANIES72

the ethical tone for the organization through visibleaction. Talking more about ethics: The leader must tirelesslystress upon the need for ethical conduct at alllevels, including among his colleagues in the senior


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leadership. Talking about the values that guideimportantdecisions and actions, making it clear to

employees that they are welcome to raise questionsor seek guidance on the ethical course of action tobe taken when in dilemma, missing no opportunityto publicly praise someone who has acted ethically,maintaining an open door policy towards ethicalissues and giving a patient hearing at the earliestopportunity possible when someone wants to talkabout an ethical issue, are strong signals a leadersends to the organization about his seriousness onthe subject of ethics. Signals that suggest thatdespiteall the talk, the leader is not really interestedin serious pursuit of ethics in the organization

includeprocrastinating discussing with employee who seeksto discuss an ethics-related issue. Being approachable: When employees interactionswith senior executives are restricted, employees feeluncomfortable voicing to their leaders, tough issuessuch as those relating to ethics and their

experiencesof what is right and wrong in the organization.Leaders must therefore consciously makethemselvesmore approachable and be good listeners. Being


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open and encouraging openness on the part ofothersin the organization prevents ethical issues from

blowing up into full-fledged problems that couldhave an irreversible adverse impact on thecompanysimage. Treating employees fairly: Most employees interpretethics as fairness. Fairness means being treatedwith dignity, courtesy, trust and respect, beinggiven the rewards that they deserve, and beingtreated fairly by their leaders and supervisors ingeneral. When employees feel that they are treatedfairly, their commitment towards ethical behaviourincreases. If they perceive themselves as beingtreated

unfairly, they are more likely to resort to varioustypes of unethical behaviour. Demonstrating through examples that ethics is a

living principle guiding the organizations working:

Highlighting instances of employees who useethical means to achieve seemingly impossible tasksdemonstrates desired behaviour. Keeping a record

of such anecdotes to cite as examples to the presentand future employees and publicizing ethicalachievements through publications, newsletters, andbulletin boards are some other means for suchdemonstration.


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Integrating values into decision-making activity:

The values of integrity, honesty, and transparencywhen integrated into all of the organizations critical

activities such as planning, budgeting, goalsetting, resource allocation, information gathering,communication, performance measurement, etc.,send strong signals about the importance of ethics.Role of Employees in Business Ethics

While leadership in a company can set the tone forethical behaviour through their own behaviour,actions,decisions, and the articulation and implementation ofan ethics policy, it is finally the employees at variouslevels of the company who actually have to manifestethical conduct in their myriad day-to-day decisionsconcerning the company. We now seek to

understandin the following some of the reasons that promptsomeemployees to deviate from an ethical path.Essentiallythere are four reasons that cause unethicalbehaviour.30.

A view that the activity is within permissible ethicaland legal limits, i.e., it is not exceedingly

illegal or immoral: Employees sometimes believethat their unethical actions are within safe limits


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and would cause no harm. Sometimes theyconcludethat whatever has not been labelled particularly

wrong is okay to do, especially if there is anincentiveattached to such an action. Employees aretempted into unethical actions because superiorsoften give the impression that those who produceresults will be well-compensated for and that themeans employed to achieve them will not bescrutinized. A view that the activity must somehow be undertaken

as it is in the individuals or companys best

interests: Some employees engage in unethicalbehaviourwhen they perceive that the job would get

done faster or better by resorting to such behaviour.They tend to cut corners and use shortcuts toachieveresults and project themselves to be better thanother employees. A view that the activity is not damaging because

it will never be discovered or exposed: Some

employeesengage in behaviour such as padding ex-VIKALPA VOLUME 32 NO 3 JULY -SEPTEMBER 2007 7373


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pense claims, falsifying financial reports, employingquestionable methods to attain results, misleadingcustomers, etc., with the belief that such behaviour

will not be damaging or will not be discovered. A view that because the company will benefit from

the activity, the company will overlook the unethical

behaviour and will even shield the person who

engages in it: Some employees resort to unethicalbehaviour with the belief that not doing so will harmthe company. For instance, employees may holdback information regarding quality shortfalls of theproduct from a potential customer for the fear thatthe deal would be lost.In the absence of a well-articulated and well-implementedethics policy, the possible views described above

tend to be subtly embedded into the thinking andbehaviourof employees, often in the form of misconceptions,which lead them to do things that are unethical.Resolving Ethical Dilemmas through the Ethics

Litmus Test

When employees confront situations that represent

potentially ethical dilemmas, subjecting thedecisionmakingprocess to the guidelines discussed in the followingcould help them make ethical decisions. Individualemployees making ethical decisions at all levels of


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the company in their day-to-day behaviours must beenabled to support the code of ethics and thecompanys

leadership that drives the ethics programme. Thefragileethical environment of the organization can be easilybroken with seemingly minor ethical lapses. It is notthecorporation that makes ethical choices. Ethicalchoicesare made by individual employees at all levels in theorganization in their day-to-day working, where therubber meets the road. Recognizing this reality, thefollowing provides an effective litmus test forindividualemployees to subject their decisions to five broad

ethicscriteria30,31. Legal compliance: Does my decision comply withall the legal requirements? Will I be violating anycriminal or civil law by undertaking the proposedaction? Do I have sufficient knowledge about thelaws governing the action that I am about to take?

Consonance with company policies and procedures:Is my plan of action in line with the rules andprocedures stated in the companys ethics policy?Is it in consonance with the traditional values of theorganization?


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Balance: Does the decision balance self-interestandthe consideration for others? Would my decision

bring short-term and long-term gains to allconcerned?Would my decision be beneficial to all thosedirectly and indirectly involved with the decision? The conscience test: If I take this decision, wouldit make me feel uncomfortable? Will I be able to lookat myself in the mirror if I did this? Will I be ableto live with the decision I make? Will taking thisdecision reflect the kind of person that I want to be?Can I talk about this decision to my mother withoutflinching or feeling ashamed? Promises made: Will my action meet the businesscommitment made to other parties such as

customers,suppliers, colleagues, employers, partners, etc.?Will my action break trust or will it build more trust?When dealing with ethical decisions, taking the timeto reflect on allthese questions will to a large extentdemystify the ethics of the situation, thus facilitatinga

responsible ethical decision to be taken. However,thereare also likely to be situations when clear answersdo


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not emerge from such reflections and introspectionsdueto the complexity of the issues involved. For

instance,the situation may be clouded by uncertainty; thedecision-maker may lack sufficient information; the decision-maker may have to reckon with conflicting viewsfrom different people concerned; or the situationcouldinvolve conflicting responsibilities. The individualemployeemay be able to better navigate through suchcomplex ethical dilemmas by some of the followingsteps32: Figuring out the consequences of alternative

coursesof action. Talking and getting advice of people who aretrustworthy.This could help make better decisions. Weighing the different points of view and take acall

through clear thinking on what is right at a giventime, place, and circumstance. Having the courage and motivation to take the rightdecision drawing on the individuals intuition,convictions,


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religious beliefs, etc., while recognizingthat everything required to be known about thesituation can never be fully known before the

decisionis made and that the situation at hand demandsanswers that have no indisputable or absolutesolutions.While reflections and introspections such as thoseenumerated above are essential to resolve complexethical74 BUSINESS ETHICS: THE NEXT FRONTIERFOR GLOBALIZING INDIAN COMPANIES74issues, this is only half the battle won. Havingarrivedat a solution that appears to have taken into account

boththe business and ethical content of the issue at handtoa satisfactory degree, an equally tough challenge istoensure that the solution culminates into calculatedaction

in order to get the job done. It is not enough to justhave a sound understanding of personal values andarrive at an ethically balanced solution. One must beable


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to adapt the solution to the realities one faces in theworkenvironment. This calls for considerable

organizationalexpertise, diplomacy, shrewdness, creativity, andboldnessin implementing the solution. In an organizationalcontext, it is sometimes necessary in order to ensurethatthe end result is achieved, to execute the solutionimaginatively,without making it obvious that the decisionmakerhas led the way. For instance, the individual mayhave to give the credit to his superior to show thelatterin good light and to let him take the credit. Thus,

oftenit may be necessary for the individual to useappropriatetactics to make his ethically balanced decision arealitybecause do-the-right-thing idealism without beingorganization-savvy is a sure path to obscurity 7.

In summary, while the companys code of ethics andenforcement of ethics by the organizationsleadershipare important and necessary, these measures wouldprove


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ineffective without the emotional power ofcommitmentfrom individuals in the organization. This

commitmentmust be inspired by pride towards being ethical andtheloyalty to ones own sense of integrity rather thansolelystemming from ones interest in his career and jobperformance33. This is where inducting the right setofpeople into the organization becomes imperative. Intodays superheated job markets in India, this couldposea serious challenge as organizations tend to recruitemployees in large numbers, more for skills, and

lessfor the individuals ethical propensities, in order thatthecompany may seize the opportunities at hand.CHALLENGES IN IMPLEMENTING BUSINESS

ETHICS IN AN ORGANIZATION

While a combination of leadership commitment,

code ofethics, training programmes, ethics hotlines, andconvictionsof individual employees help to set the ethical


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standards for the organization, there are severalpeoplerelatedand process-related implementation challenges

an organization must grapple with in establishingandreinforcing these ethical norms.People Implementation Challenges29,32:

Establishing ethical norms and enforcing ethicalbehaviour is a huge task requiring considerableinvestment of time, resources, and an unremittingeffort on the part of leadership of the organization. Career and job performance are two factors thatmost people in an organization fear jeopardizing.This produces strong pressures to choose thelessdifficultunethical option rather than the relatively

more difficult ethical option in a given situation. When an employee faces an ethical or legal issue,he is generally unwilling to seek help or guidancefrom inside the organization on policy guidelinesor laws. This happens for a variety of reasonsincludingsensitivity of the issue at hand. This often

results in the individual making mistakes. Suchreticence results in the ethics and complianceprogrammebecoming merely a statement of goodintentions.


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Employees are often unwilling to report anobservedmisconduct or legal violation, as they fear that it

would be putting their careers and family at stake.They also fear retaliation or being alienated in theevent that their identity gets exposed. Thedevelopingunethical risk or problem could get aggravatedand reach a point where it is too late for anycorrective action. Raising every individual employees awareness toethical and legal issues can be a key challenge.Manypeople often manifest unethical behaviour becausethey are not aware of the laws and regulations aswell as ethical imperatives pertaining to their work.

Making every employee familiar with legal andethical dimensions that governs his job does nothappen naturally and can occur only if there isintense organizational commitment to ethics. Very few companies embody values consistentwiththose that the employee hopes to live by. This forces

the employee to reluctantly adapt himself to theculture of the particular company. Otherwise, hisonly option would be to change the job with noguarantee that the new job would be any better onthe ethics front. Perhaps an ethics certification of


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companies on the lines of quality certification, ISO,CMM, environment (ISO14000), etc., which wouldbecome a reality over the next several years, will

provide aspiring employees prior information aboutVIKALPA VOLUME 32 NO 3 JULY -SEPTEMBER 2007 7575ethical leanings of the company before they decideto join it. It is not easy to determine the ethical DNA ofemployees at the time of their joining the company.Reference checks can help, but most of them tendto be formalities and usually do not reveal any pasthistory of unethical behaviour, as the personprovidingthe reference usually tends to desist from

giving adverse feedback on past unethicalbehaviour,fearing that he would be jeopardizing the careerchances of the person being assessed. Moreover,with pressure for skilled people being faced byevery organization in the country, due to hugegrowth opportunities, some of the processes for

holistic screening of candidates seeking jobs in thecompany tend to be short-circuited.Process Implementation Challenges29

Ethics codes can at best serve as a guide post.They


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cannot provide comprehensively a rule for everysituation or specific advice for every gray area thatan employee would possibly encounter in his job.

This could sometimes put people in a dilemmaabout what are acceptable and unacceptablebehaviourpatterns. Striking the right balance betweenoffering clear directions on every conceivablesituation,thus making the ethics code unwieldy, andproviding latitude for individual judgment is anontrivialproblem while formulating the code of ethics. Employees sometimes view the ethics programmeas superficial, either put in place to respond toexternal pressures or to protect top management

from blame or for external publicity purposes. Insuch situations, employees are likely to view theethics programme with cynicism. Such perceptionsmake the organization more prone to unethicalbehaviour, lead to lower awareness of ethical issuesamong employees, with employees being less likelyto seek advice from within the organization when

confronted with an ethical dilemma. A lack of trust by employees about internalprocessessuch as those pertaining to whistle blowingdiscourages them from bringing ethical and legal


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violations to the notice of the management, thusweakening the ethics programme. The ethical climate of an organization is reinforced

by the ethical actions of each and every individual.If an employee operates outside the organizationsethical system, and such behaviour is not detectedand appropriately punished, it gets communicatedto and often emulated by other employees andstakeholders. This results in the employeescollectivelyundermining the credibility of the organizationscommitment to ethics. Enforcement of ethics poses special challenges insituations involving decentralized operations. Withmore and more employees working independentlyand frequently out of their homes, such

decentralizedworking is an emerging reality. There is littlepossibility for direct supervision of such employees,making it a challenge to ensure that theseemployeesconform to the companys stated ethical standards.In such situations, leaders are almost entirely

dependenton the ethical judgment and moral characterof these employees. Keeping the code of ethics updated andcontemporary


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is a challenge. To continue to be relevant, theethics code must evolve with the changingstandards

of the legal and societal as well as organizationalframeworks in dealing with ethical issues.Examples of such evolution of the legal, societal,and organizational environments include emergenceof new technology, new forms of competition, newtypes of customers, new issues relating to vendors,changing marketplace dynamics, new laws andregulations, etc. Designing ethics codes and compliance measuresfor companies that are global in scope can beextremelychallenging. Standards of ethical conductmay work well in the companys home country but

may fail in other countries due to differing normsand laws, different regulations, cultural differences,different ethical standards, and different ways ofhandling unethical behaviour. Given the pressures to grow the top and bottomlines in most corporations, adherence to ethics isoften seen as needless distraction with no

immediatepay-off. This orientation must change if ethicsshould take centre-stage in an organizationsfunctioning.


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The key challenge for the leadership inorganizationsis to address cynicism, establish the need for

ethical functioning of the company, and present aroad map to achieve this despite widespreadsystemichindrances.76 BUSINESS ETHICS: THE NEXT FRONTIERFOR GLOBALIZING INDIAN COMPANIES76CONCLUSIONS

The task of building an ethical corporate culture bybringing about organizational values and individualprinciples to life is a challenging process. Indiancompaniesembarking on this task must understand that this

is a difficult journey. There are many steps involvedincreating an ethical climate that strengthens therelationshipsand reputations on which the companys successdepends. Merely implementing a legal-compliance-based

programme that prevents, detects, and punisheslegaland regulatory violations does little to tackle theproblemsthat trigger unethical conduct. Although it is


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necessary to have a well-thought-out strategy forlegalcompliance that must be strongly implemented, it is

hardly adequate for managing the extensivepanoramaof ethical issues that confront managers every day.Goingbeyond the disciplinary legal-compliance approachandcombining it with a value-based approach is what isrequired to implement a strong ethics programme inorganizations. An ethics programme designed onthebasis of a value-based approach inspires moralcommitmentand ethical behaviour in accordance with a set of

guiding principles.The structural features of a value-based ethicsprogramme are similar to that of a legal-compliancebasedprogramme. It requires a code of ethics to becrafted. Training to familiarize employees about thecode of ethics is essential. Mechanisms for reporting

ethical lapses and scrutiny of the same must be putinplace. Audits and controls to ensure that thecompany


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meets its stated standards of ethical conduct mustbeinstituted. A value-based ethics programme is much

more holistic in that it enables self-governance andresponsible conduct by all employees of theorganization,thereby bringing to life the organizations guidingvalues. Such a programme defines theresponsibilitiesand aspirations that constitute an organizationsethicalculture. Most importantly, a value-based ethicsinitiativeaccentuates the personal commitment and credibilityof leaders at all levels, putting them under intensespotlight and scrutiny by other employees of the

organization.The responsible actions of leaders, their willingnessto act on the values they espouse, and theircontinualdemonstration of integrity, honesty, transparency,and consistency are keys to channel organizationalbehaviour in the ethical direction. When the

companysleadership falters on ethical values, employees arelikelyto become skeptical and cynical about the relevanceof


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ethics in their day-to-day functioning, resulting in theeventual abandonment of the ethics programme.One of the first steps towards driving the ethics

programme is to establish a relevant code of ethicsrootedin the organizational values, shared values ofemployees,and the business philosophy of all key stakeholders.They must not be mere compliance documents orrulebooksthat differentiate the right from wrong. It is essentialto effectively communicate the code of ethics tothe intended audience, train employees on thecodescontent so that they understand its practicalimportance,

and to discuss on an on-going basis, ways toaddressethical challenges not directly addressed by thecode.Deploying mechanisms to report and investigatemisconduct,and punishing violators after thorough investigation

are some of the measures without which evena well-intentioned ethics programme is likely toflounder.Printed ethics codes are helpful, but the organizationmust realize that regardless of what the code says


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in print, ethical behaviour is largely dependent onleaders.If employees observe ethical indiscretion by the

leader, in all likelihood they will soon begin toemulatesuch unethical behaviour. This mandates that theleadermust be a role model of ethical behaviour. He mustwalkthe talk, and lead by example.Perhaps the most important thing to rememberaboutethics is that ethical behaviour has to be practisedbyemployees throughout the company. They need tomake

ethically sound decisions on a day-to-day basis.Ethicalawareness and thinking must become part of theorganizationswork culture. This can be facilitated by integratingthe companys values into its operating systems andprocesses. When trying to resolve complex and

oftendifficult ethical dilemmas, employees must ultimatelymake a decision relying on their own judgment,intelligence,and principles.


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Indian businesses that want to endure, grow, andmake good profits in the global marketplace over thelong haul have no option but to proactively

implementbenchmark ethical business practices, which in turnwillenable them to achieve market trust and excellentreputation.In a broader sense, business ethics is all aboutbrand and reputation. It is about the feeling thatstakeholderscustomers, suppliers, employees,shareholders,society at large, and the governmenthaveabout the organization that make them want to buythecompanys products or services, want to deal with

theVIKALPA VOLUME 32 NO 3 JULY -SEPTEMBER 2007 7777company, want to work for or be associated in anymanner with the company, want to invest theirmoney

in the company, and want to support the growth ofthecompany. Creating a brand that inspires trust is thecornerstone to success. Trust must be earned by notonly


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maintaining accurate and truthful records andfinancialstatements, being socially responsible and

establishingproper systems of audit and control, but additionallybyshaping an appropriate set of organizational values,integrating a shared set of values, and guidingprinciplesinto the normal processes of managementdecisionmaking,ensuring that the organizations systems supportand fortify the companys values, by leaders beingcredible and committed to the values they espouse,andby employees being committed to ethical behavior.

As Michael Hackworth, Chairman of the Board ofCirrus Logic Inc., USA points out, If trust and goodethics are important today, they will be even morecrucialin the future. Because of phenomena such as theemergenceof a global perspective in all of our institutions

and because of the ubiquitous, instant, andanonymouscommunication afforded by the Internet, unethicalexcessescan be easily exposed and disseminated at little


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or no cost. No longer can leaders prosper at theexpenseof the common good while they hide behind the

barriersof language, geography, or cover-up tactics. In thisinterconnected world, only ethical leaders andcompanieswill survive.

At final reckoning, corporate ethics is the complexinterplay of three different dimensions. The first isthesocietal/legal norms and mandates. The second isthecompanys explicit or implicit code of conduct. Andfinally, the employee making a call on an ethicaldilemma

has to factor in his own individual values. It isthis complexity that makes the subject of businessethicschallenging. The organizations leadership would dowell by thinking through the ramifications of theirownapproach and predilections to this important subject.

In conclusion, it will help the top managers ofglobalizing Indian companies to remember thelessonsfrom an interesting and relevant parable from India.


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There were once many fish living happily in a pond.Ina particular year, the monsoons were getting

delayed.Some sagacious fishes inferred that something wasgoingdrastically wrong and suggested that they allundertakean arduous swim through a narrow interconnectingcanalto a much larger body of water that had a perennialwatersource. Many other fish scoffed at this proposal.Theysaid, What is the hurry? Why are you getting allworked

up? The

corporate ethics word good one

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