RACY CASES -30 A question of Ethics


A V Vedpuriswar and V Pattabhi Ram

Boy, it was the final semester. And the subject: Business Ethics.  What an irony.  In the coming months these boys and girls would get into the big, bad, world of business and ethics would be the first casualty.  Yet, they were discussing ethics in the conduct of business affairs! Professor Chatshow was saying, “In the long run, only companies which are ethical will survive. Those who take shortcuts will fall by the wayside.”   Phew.

Debbie, the baby faced topper, said, “It is expensive to do business if one is ethical”. Someone asked “How?” Rising to her full height of 5ft nothing Debbie said,  “Let us say a company has a hot investment proposal.  If it pays speed money, the proposal gets cleared fast. Otherwise, it could take years. The message is simple: If the company is prepared to play ball, it gains.  If it holds the high moral ground, it loses”.  Boka stepped in.  “In fact, by not paying speed money, the company is not even acting in the interests of shareholders”! What a distinct touché. Flowers brought in the global perspective.  “Many companies bribed their way into Indonesia during Suharto’s tenure and are richer for the effort. Those who did not, missed out on the opportunity.”

Chatshow felt sad.  Here were high voltage young graduates who would be leaders of tomorrow’s India.  And they were justifying corruption.  He felt duty bound to put them on the right track.  And so he countered: “You cannot mechanically apply cost benefit analysis to ethics. Companies should not bother about whether the costs will be recovered immediately. They must take a long-term view.” Goggles sniped, “Sir, according to Keynes, in the long run all men are dead.”  The class roared.

Chatshow swished his mane and waved them to silence.  “That isn’t right,” he said.  And reminded them of the English adage, ‘The king is dead, long live the king’.  “Over time, companies that use sharp (euphemism for unethical) business practices collapse.”  The girl in the middle row (GITMR) put her hand up.  “I agree with professor,” she said.  And added, “Take Enron or Tyco. Once highflying companies, the moment their misdeeds were exposed, these powerhouses crumbled like a pack of cards”. Chatshow continued, “On the other hand, ethical and transparent companies like the Tatas may suffer temporary setbacks but in the long haul they emerge stronger. In fact, the markets attach a premium to such companies.”

Flowers decided to narrate the outcome of a national survey done some years ago by a leading marketing agency.  The questionnaire had only two questions.  “What car did you buy?”  And, “Why did you buy that car?”  Those who chose Mercedes said that it was the ultimate in luxury. Those who picked Maruti said it was eminently affordable.  In the case of Indica eight out of ten had written, “Because it was manufactured by the Tatas.”  Mark it, they hadn’t said, “because it was an Indian car.”  Imagine the pride that Ratan Tata would have felt, he pointed out.  A backbencher hissed, “I guess it was worth a lifetime’s effort”.

The class sighed.  Goggles wasn’t impressed.    He said, “Where does one draw the line? You cannot be a Raja Harishchandra or a Mahatma Gandhi in today’s competitive environment. If somebody slaps me you cant expect me to turn the other cheek towards him, vintage Gandhi. Similarly a key skill today is to know when to speak out and when to keep shut”.  Flowers supplemented. “Companies must attract customers. Take beauty care products. Women seeing such ads might think that by applying the lotion, they will become beautiful. That, their very personality will change! We know that such claims are highly exaggerated. Yet, some of the most respected FMCG companies continue to show such ads”. And then asked rhetorically, “Are they being ethical?”

GITMR decided to go hammer and tongs.  “Many ads project questionable lifestyles.  Like spending heavily, wearing obscene clothes etc.  Then there are serials which are a bad influence on viewers.    Many of them show extra marital affairs, hardly appropriate in a society like ours where the institution of marriage is sacred. Yet leading companies continue to sponsor such programs”. And then asked poignantly, “Are they being unethical?”

Chatshow realized he was losing out.  Boka drove a nail.  “I agree with my friends. But I want to raise a more fundamental issue.”    The class waited to hear the guy with a reputation for incisive analysis.  Boka didn’t let them down.  “Last week I read about a US company which was trying to export its products to Brazil. The Brazilian customs officer was refusing to clear the consignment. The US Company’s local rep messaged HQ for money saying that with that payment the consignment would be cleared immediately. But the parent company would have nothing of it.

As time passed, the US Company decided to employ a high profile lawyer and paid him $50,000 as professional fees to sort out the matter. Two years later the lawyer won the case. But the question remained. Which was the better option? Paying $500 to a customs officer (who finds it difficult to make his ends meet with his meager salary) or $50,000 to a high profile lawyer?”  GITMR agreed.  “What’s smarter?  Refusing payment and losing business?  Or paying up and capturing market share?   Pray, which is in the interests of your shareholders?”

Flowers chipped in: “While one feels like praising the MNC for its principled stand, I think the issue isn’t that simple. No company is in business for charity.  For sure, the MNC would have recovered from the customers the additional costs that it incurred. To me, it makes greater business sense to pay speed money.  After all, what is the point in following ethical principles, if it ends up hurting a vast section of society.”

Chatshow continued to feel sad.  He wondered whether there was a generation gap between him and his students.  Was he living life in an ivory tower?  A thought crossed his mind. “We tell God, if such and such things, I shall do such and such thing for you.  If that’s okay, corruption is okay”. He suddenly felt ashamed.  He was worried that if the class continued for another hour, he might get converted to their point of view.  Mercifully, the gong went.


About Pattabhi Ram

A chartered accountant by profession, a writer by passion and a teacher by accidental choice.
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