The Man: The chairman of Wipro converted a vegetable oil manufacturing and trading firm into one of the world’s most respected IT services companies; identified the potential of energy and environment business early on—and is betting a quarter of Wipro’s revenues will come from green services. He tells us the real threat to business is from within, from poor ethical standards and lack of integrity.
The Oeuvre: Two years ago, Premji transferred Rs 8,000 crore worth of shares to Azim Premji Foundation which works on education and related areas.
X-Factor: Low-key, private and sometimes brutally honest.
The Message: Businesses must reconnect success and profits with social progress.
The real threat to business is from within, from poor
ethical standards and lack of integrity that can do incalculable harm. History has proven repeatedly that business ethics, shared value and corporate governance determine the longevity of an enterprise.
What is required is ‘capacity building’ towards deeper ethical behavior. Employees must know compliance is not a tick-box activity and they ought to witness their organisations transcend compliance and infuse ethical practices into every day action. They need to be empowered to thwart unethical action at work and appreciate the fact that business integrity is directly related to the future of the company, their families and that it securitizes their livelihoods.
Any business has two obvious dimensions; first, to do businesses we must be creative, enterprising and innovative. That’s what leads to good business ideas—ideas that serve society, create employment, generate wealth, and improve the world we live in. Second, once a business is created, it must protect and sustain itself. We think of this as being centred on finding capital, great talent, intelligent marketing and raising barriers by creating competitive advantages. However, the real threat to business is from within, from poor ethical standards and lack of integrity that can do incalculable harm. In a world that is plagued by constraints, being an ethical organisation calls for serious and sustained action.
History and recent past have shown repeatedly that business ethics, shared value and corporate governance determine the longevity of an enterprise. Integrity and unflinching commitment to values is what builds the backbone of a strong business. It is this that drives the trust that society, clients and employees place in any enterprise.
The last two decades have been especially revealing. We have witnessed businesses succumb to poor ethical standards, impacting not only on their immediate stakeholders, but entire economies and industries. A common reason attributed to the falling trust in business is that the latter is trained to act primarily in its own interests with little consideration for the larger good; the 2008 global financial crisis is often cited as an illustration of this moral shortcoming. Naturally, there is a crisis of confidence in the values of business organisations; there is a crisis of confidence in their ability to lead; and there is a crisis of confidence in their moral right to continue to do business.
However, there is a silver lining to the cloud. Over the last decade or so, the response from the business community to integrity violations and breaches is growing wider and stronger. This is encouraging. We are witnessing a course correction. Societies and companies are creating better ways to address the issues of eroding business values, integrity and ethics. Policy and standards are coming into play, stronger management systems are evolving, transparency in business conduct is highly prized and where there is failure the penalties are severe. This is commendable. But it is difficult to say if these are truly the solutions that drive business sustainability. Sometimes, policy, standards and legislation appear to tilt on the other side, and seem stifling.
Maintaining guidelines and reporting frameworks come with a cost. Invariably, the cost is transferred to the customer. My apprehensions with depending solely on guidelines and standards persist for other reasons. Primary amongst them is the fact that regulations lead to compliance and not necessarily to business sustainability. Anything externally driven is not sustainable. On the other hand, ethical standards are fundamental and earn the goodwill of all stakeholders Does this mean that guidelines and standards should be junked? Not in the least. They must be embraced. With some road testing, these guidelines could become norms, and hopefully, over a period of time, they will be integrated in business systems and processes.
From an India perspective, there is an equally deep and urgent need to go beyond compliance enforced by standards. Last year, the Ministry of Corporate Affairs announced the National Voluntary Guidelines (NVG) outlining the social, environmental and economic responsibilities businesses must work towards. It is progressive guidance. It may appear to be a small start, but there are very few countries to have had the foresight to formulate such recommendations.
The timing of the NVGs is perfect. Globally, corruption adds up to 10 percent to the total cost of doing business and 25 percent to the cost of procurement contracts in developing countries. The cost of moving a business from a relatively spotless geography to a country that has high to medium levels of corruption is fairly high: The corruption adds the equivalent of a 20 percent tax on foreign business. There are even bona fide economic reasons for businesses to develop ethical standards.
Like anything else in business, what is required is ‘capacity building’ towards deeper ethical behaviour. From our experience at Wipro, we know that the capacity building begins not at the top, but at the bottom. Employees must know, feel and be reassured about the fact that they work in an environment that is safe in every sense of the word. They need to know that compliance is not a tick box activity. They need to witness their organisations transcending compliance and infusing ethical practices into everyday action. They need to be empowered to thwart unethical action in their work environments. They need to appreciate the fact that business integrity standards are maintained and are directly related to the future success of the company. They must realise that maintaining those standards—economic, social and environmental—insulates them, their families and their company from legal and social action. It securitizes their livelihoods.
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(This story appears in the 25 May, 2012 issue of Forbes India. To visit our Archives, click here.)