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BW Businessworld

Leadership Drives Ethics

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In the Harvard Business Review issue of September-October 1987, Sir Adrian Cadbury wrote an article titled Ethical Managers Make Their Own Rules. Parts of it are reproduced here:

In 1900, Queen Victoria sent a decorative tin with a bar of chocolate inside to all of her soldiers who were serving in South Africa.... At the time, the order (placed on Cadbury) faced my grandfather with an ethical dilemma. He owned and ran the second-largest chocolate company in Britain, so he was trying harder and the order meant additional work for the factory. Yet he was deeply and publicly opposed to the Anglo-Boer War. He resolved the dilemma by accepting the order, but carrying it out at cost... made no profit out of what he saw as an unjust war, his employees benefited from the additional work, the soldiers received their royal present....

My grandfather was able to resolve the conflict between the decision best for his business and his personal code of ethics because he and his family owned the firm which bore their name. Certainly his dilemma would have been more acute if he had had to take into account the interests of outside shareholders, many of whom would no doubt have been in favour both of the war and of profiting from it. But even so, not all my grandfather's ethical dilemmas could be as straightforwardly resolved.

How many of us would even think of this as an ethical dilemma? How many managers in a cigarette or gutka company see any ethical dilemma in selling a harmful product? They can justify it on the grounds of "earning a living". Such rationalisations annihilate personal ethics.

Ethics is all about business and social interactions based on the belief that the self and all others deserve equal consideration. Ethics are dictated by the leaders. If there is no explicit code of ethics (COE) in an organisation, an  implicit code develops, which can be dangerous because it is open to multiple interpretations. And if the explicit code is observed more in the breach, as in the government, then people tend to follow the implicit code.

We know that our national leaders' rhetoric against corruption is hogwash. The code of  conduct, implicitly communicated, seems to be: "Every man for himself and the devil take the hindmost!" There is frequently a gulf between people's ‘professed' and ‘espoused' philosophies. That is how capitalism thrives in communist states, and why our lawmakers are lawbreakers.

Writing and communicating a COE is vital, as is a code of conduct for all employees. An explicit COE is like a map. If everybody does not operate by the same map, they will go off in different directions. Clearly, in Delana, there was no COE. In fact, the conflicting messages could potentially unleash a schizophrenia epidemic in Delana. When Kant asks, "Do managers have to be told to be ethical?", is he being naive or is he in denial? It is the bounden duty of management to communicate the COE to all employees. It also needs to be understood that ethics is not synonymous with legality.

Tax avoidance (taking advantage of favour-able tax laws) is not necessarily illegal, but it may be unethical. Legal compliance is a necessity, but not a sufficient precondition to being ethical.

In life, difficult questions have to be constantly answered. Is it more important for me to win or be ethical? The answer has to come from deep within. In the corporate world, I suspect, widespread cardiac diseases are not only due to sedentary and unhealthy lifestyles, but often  because of conflicts between one's beliefs and actions. Sadly, corporate success (read politics) frequently requires one to bend one's ethics. The ‘headline test' is a good one: am I happy to have my actions reported in tomorrow's headlines? If yes, go ahead.

Employees focus on what is measured. If competence is measured on the basis of the  bottom line, then that becomes the focus of all effort. I personally do not know of any company that measures and rewards ethical behaviour. Delana is no exception.

In many ways, Delana is a microcosm of society. Socially, we revel in discussions on ethics. How can people from good backgrounds have dubious standards of ethics? How much of a company's brand equity comes from values, etc.? And yet, how many companies have a regular ethics audit? It is comforting to have drawing room debates on such issues because it externalises the problem leading to that warm ‘I-am-okay, you-are-not-okay' feeling. We bemoan the lack of ethics and morals yet how many of us have the courage of conviction to stand up and be counted? Does any chamber of commerce require all its members to sign a code of ethics? Does any industry body or company stand up and warn corrupt politicians or a state government that it will curtail or pull out its investment if the state does not clean up? No. Because adherence to ethics needs both courage and sacrifice.

Nripjit Singh (Noni) Chawla is an independent management advisor. An alumnus of IIM Calcutta, he has worked for 20 years in ITC and was the managing director at Max India

(This story was published in Businessworld Issue Dated 11-04-2011)