Business ethics are taught only in classrooms, with little enforcement

Scenario 1: The manufacturer sells a product that they know will be replaced in six months. They make consumers buy more by purposefully making it difficult to make repairs, or by preventing backwards compatibility. They say, “We are all about constant innovation”. Planned obsolescence is a common business practice. Is it ethical?

Scenario 2: Pharmaceutical companies routinely sell drugs in the third world that have been banned in the developed world where the regulatory environment is less porous. Many of them have been accused of conducting human trials of drugs with samples drawn from slum dwellers.

Scenario 3: You learn that your client, a well-known fast food company uses three times the allowed limit of monosodium glutamate in their recipe. You are the advertising agency that has created the hugely successful campaign that has driven up the sales, especially among children. If you give up the client, you will have to lay off half your employees. Should you stop working for the client?

Everything that is legally permissible is not always ethical. The first Asian dean of Harvard Business School Nitin Nohria says, “Just as most people overestimate how smart they are, many may overestimate how good they are.” In today’s business environment, the uncertainty of markets and flippant consumers coupled with shareholders who expect constantly escalating returns, places unreasonable demands on leaders. Sometimes it can be blind ambition that drives the leader to look the other way. Combined together, the ethical boundaries are often seen as a barrier that is impractical to follow in the real world.

The external world is the same for everyone. But not everyone succumbs to those pressures. Different societies have different levels of acceptance of dishonesty. What drives unethical behaviour?

Conflict of Interest

Business leaders have access to information that an average employee or investor does not. When they use that information to tip off friends and family, we cry foul. That’s what Rajat Gupta has been accused of.

Crony capitalism is in the same league. Suresh Kalmadi gave lucrative contracts to his cronies and allowed them to overcharge for goods and services. He created a double whammy by allowing them to drop the quality as well.
Companies encourage employees to sign “cupid contracts” when colleagues get into an amorous relationship. That prevents harassment claims later.

When In Rome …

The company culture is a big factor in defining standards of behaviour. “Everyone does it” is the single largest justification given when unethical behaviour gets uncovered. I have seen varying degrees of acceptance in each company I have worked for. The tone is set at the top. The leader’s behaviour is mimicked by others in the organisation.

A recent report of Ernst & Young views unethical practices to be more prevalent in Asia and Africa, including India, than in some other countries. That must have something to do with how much the country condones and expects unethical behaviour.

Understated costs and overstated sales are more common business practices than we think. Revenues are reported ahead of time and customers are sold products to meet short-term sales targets.

Unequal Information

Whenever information is unequally known, it leads to unethical practices. Financial instruments are subject to market risk. The regulatory bodies mandate that the companies share the risk element with investors so that they can make an “informed choice”. The companies have bypassed this by dumping legalese coupled with financial jargon written in microscopic font. The consumers are drowned in a sea of information and the onus of poor choice is transferred to them. Is that ethical?

Doctors prescribe unnecessary procedures and diagnostic tests. The patient has no knowledge of the relevance of the tests. It is easy for the commercial motive to override the oath that doctors take when they are students. Pharma companies “incentivise” the doctors to prescribe their medicines. That turns a doctor into a salesperson for the manufacturer of medicines. Couple this with blind trust of the patients, the doctors are tempted to blur the ethical boundary.

Shades of Grey

The newborn human baby can only distinguish between being hungry and not hungry. The baby will scream the moment she experiences hunger. As adults we learn to distinguish shades of grey. Adults can clearly differentiate between degrees of hunger. Unfortunately, we do not seem to be as naturally skilled in distinguishing shades of grey when it comes to ethics. We have to be told what is right and wrong from the people we grow up with. Children learn their first lessons in ethics from the family, the school, peers and most powerfully from the media. When we observe a gap between what we have been told and what we see people doing, there is dissonance.

Millennials Plus Technology = Hope

So far we have only been taught Business Ethics in the classroom. There has been little enforcement. The combination of millennials and technology in the organisations will change that. This is a generation that is comfortable sharing information online. They post everything from their relationship status to the party pictures without a fumble. Millennials are bringing their values into the career equation by placing a premium on employers’ reputation for social responsibility. That will be the biggest driver of ethical behaviour.

Then there is technology. The prevalence of cell phones with cameras and sound recorders has made it easy for people to keep vigil. That affects the company’s reputation far more sharply than even a report in the mainstream media. It is credible and hence whistle-blowing is slowly going mainstream. Transgressions have become easier to report through social media. These are voices that are hard to suppress. Remember how quickly social media was able to drive the Anna Hazare movement fueled by the youth. This will drive compliance to norms.

Millennials, as consumers, are pushing companies to change the ways of doing business to align with the values of civic and global responsibility. Now they are choosing to join employers who are ethical. That will be the single largest business case for ethical behaviour. Without the right talent, the company’s best business plans will flounder. Talent shortage can be a powerful driver of profits and now a great propeller of ethical behaviour. Millennials have finally got a chance to change the world. They must not let go this opportunity.

Abhijit Bhaduri is Chief Learning Officer, Wipro Group