Institutions cannot be built on the reputation of individuals or daily sermons on governance and morality; they have to be based on systems and processes
On Sunday evening, I ran into a friend who has just stepped into the role of a harried Indian father, scouting for a potential groom for his two daughters. Yes indeed, the arranged marriage still rules in India and although his daughters are both management graduates who have studied abroad, when it comes to marriage, they are happy to have papa find them a hubby.
The friend hails from a southern Indian community where dowry rules, no matter what the law says about it and the groom-hunt is nothing but a bazaar where the highest bidder snaps up the 'boy'. In this case, the parents of the 'boy' apparently opened negotiations by quoting a base price of Rs50 lakh, even before the potential couple had met each other.
After all, his son was a prize catch—he was an IIT Engineer and now worked at Infosys—and his parents saw no point in wasting his time unless the girl qualified in the financial bid!
But it is the bit about the IIT degree and job at Infosys that has triggered this piece. The company prides itself on its good governance practices, high ethical standards and sense of social responsibility. The company also organises lectures and development courses for its employees, presumably to make them better human beings. Does any of it really rub off on the employees? Apparently not; after all, the potential groom of our story doesn't have any problem with his parents auctioning him to the highest bidder (although, strictly speaking, he may be given a choice of two or three short-listed possible brides) when it comes to marriage, even though accepting dowry is illegal. And he ignores the fact that the potential bride that his parents are vetting, is well-educated, works in a multinational and earns as much as he does.
But my issue is not about arranged marriages and the dowry system but about the popular corporate delusion that endless discussion on corporate governance will lead to more ethically correct companies. Just as our engineer will not give up on a fat dowry, just because he starts working at Infosys, companies will observe good governance principles only if it is part of the DNA of individual senior managers and has nothing to do with the organisation they work for. On the contrary, we have plenty of evidence that those who preach and teach good governance, don’t bother to follow it at all.
What could be a better illustration than the twin debacles at the International School of Business (ISB), Hyderabad. ISB is a B-School whose pedigree and board of directors would even be the envy of Ivy League institutions. Set up by Wharton, Kellogg and the London School of Business, the three most famous destinations for a management education, it was founded by two partners of McKinsey & Co, the world's top consulting firm. A couple of days ago, one of them, Anil Kumar, pleaded guilty to charges of insider trading and admitted that Raj Rajaratnam of the Galleon Hedge Fund paid him $1.75 million in exchange for confidential information.
Kumar is understood to have made $2.6 million in illicit funds by leaking information on Advanced Micro Devices Inc and eBay Inc. He was asked to step down from the ISB board in October, when it was clear that he was being investigated in the Galleon securities fraud case.
Earlier, ISB's dean Dr Rammohan Rao had to quit in similar ignominy after the Satyam scandal erupted. Dr Rao had made things worse for himself by initially defending the board's support of a dubious rescue deal between Satyam Computers and Maytas Infrastructure, an entity owned by the Satyam founders.
But again, Dr Rao was not the only Ivy League don who did not practice what he preached. Harvard don and author of several management books, the arrogant Prof Krishna G Palepu used to charge a steep fee to lecture the Tatas and other Indian business tycoons on governance. When Ramalinga Raju confessed to India's biggest accounting fraud, we learnt that Prof Palepu earned nearly Rs one crore from Satyam in various fees and consultancy services. And he used to lecture business on "Making corporate boards more effective"!
Whether it is a young engineer at Infosys who will not sacrifice his right to a dowry or obscenely paid academics and consultants who will throw ethics to the wind for more fees, clearly the road to good ethics is not lectures, seminars or even leading by example. It has to be part of your DNA.
Indian companies are not really serious about the governance business. If they were, they would make the effort to get people with the right mental wiring. In fact, they would do what the better companies in the hospitality business are doing. The hospitality sector recognises that there are certain people who are hard-wired to be gracious and patient and perfectly suited to an industry where consumer demands can be trying on the nerves of most people. They do this by conducting overt or subtle psychographic tests to find people with the right attitude. And when they do find these people, the results can be amazing. The best but most extreme example of how this works are all the stories that emanated from survivors of the terrorist attacks on The Trident and The Taj Mahal Hotel in Mumbai on 26/11/08. The stories of the bravery, service and sacrifice of these executives (many of them paid with their lives) make for business legends. Similarly, Kingfisher is rated the best airline, mainly because of the service quality. It can be taught, but there is no substitute for starting right by picking the right people.
That is why, institutions cannot be built on the reputation of individuals or daily sermons on governance and morality; they have to be based on systems and processes to ensure correct business practices day in and day out.