ORGANIZATION BEHAVIOUR

ORGANIZATION BEHAVIOUR - Transcript

PROJECT REPORT on ETHICAL LEADERSHIP

Submitted To Dr BINDU GUPTA

Submitted By REKHA RAMASWAMY 09FT 125 SANDEEP REDDY 09FT 136 SHUVAM KOLEY 09FT 149 SREENEETH SREEVILASAN 09FT 154 RAVI RAWAT 09FT 188 SAHIL BHARDWAJ 09FT 189

CONTENTS

PREFACE

We undertook the Project on ETHICAL LEADERSHIP BEHAVIOUR as a part of our course curriculum of PGDM in the field of Marketing Management at IMT GHAZIABAD The duration of our project was 2 weeks During the first week of our Project we performed a general analysis of the topic and finalized the questionnaire After this period we focused on collection of data the analysis of the same We have tried to incorporate the results to the best of our abilities available resources

ACKNOWLEDGEMENT There is always a sense of gratitude which everyone express to others for the helpful and needful services they render during different phases of life and help to achieve the goals We too want to express our deep gratitude to each and everyone who have always been helpful to us in getting this project to a successful end We are thankful to Dr BINDU GUPTA Associate Professor ORGANIZATIONAL BEHAVIOUR IMT GHAZIABAD who is not only our teacher in charge of Marketing Management but also our guide for this project We express our humble thanks to her for spacing every moment out of her busy schedule for us who has not only guided us properly but also gave us an encouraging help to make this project successful one Without her able guidance we would not have been able to complete this project

EXECUTIVE SUMMARY The definition of leadership currently is changing Instead of the usual managing perspective that we attach to leadership we have come to associate it with leading yourself first It is said that true leaders are not once who lead others they are ones who set an example to others by the way they lead their lives True leaders are not bounded in their decisions by the limits of their organizations Their decisions are ethical and take into consideration the good of the society and also the protection of the environment around them Ethical leadership is not something that can be enforced but has to be driven from the value system of the organisation The values of the decision maker as well play a prime role in the ethical decisions taken by him The ethical leadership not only benefits the organisation as well as the society From the organisation point of view ethical leadership by the top management creates a positive image of the organisation in the minds of the people associated with it like the employees shareholders etc The ethical image created in the minds of employees gives a feeling of pride and self motivation from within themselves The employees would feel more secure and will be loyal in providing their services to a company which is ethically concerned about its employees The business associates of a company like suppliers vendors dealers creditors etc will have a feeling of good faith and security with a company that follows ethical practices This in turn would help in increasing the business of the company In the context of the ethical aspects of leadership in business organizations the research work analyses different characteristics of ethical practices carried out by leaders like Lee Scott Ratan Tata and Stuart Rose in their respective organizations Also the unethical behavior exhibited by some of the leaders like Ken Lay Martha Stewart and Ramalinga Raju who got lured by greed have been discussed in order to analyze the importance of ethical leadership for the successful functioning of any organization To understand the significance of ethics in leadership in the today s world a research has been conducted in the form of a questionnaire Further analysis has been done to understand what people think about ethical behavior and how much importance they attach to it in their daily life The ethical practices like CSR would help the betterment of our society and environment The most important contribution from the companies following ethical practices is that they would try to set up an ideal system of corporate governance which would force the other players also to follow the practices thereby resulting in the betterment of society The CSR practices helps in the improvement of infrastructure facilities literacy rate health facilities and reducing unemployment Ethical leaders take decisions which take into consideration the environment around them and they ensure that practices which benefit the company do not affect the environment The ethical practices like go green initiatives power saving initiatives no plastic initiatives etc would help in reducing pollution and conserving the environment It is believed that the companies would face some initial problems like delays and expenditures following the ethical practices However the corporate companies which strictly follow the ethical practices in its processes and financial dealings reveal that on a long run following ethical practices has benefited the company INTRODUCTION

Leadership is intentional influence Michael McKinney

Perhaps no other issue can so dramatically define the difference between management and leadership than the attention the individual gives to ethics A manager must focus on the on the day to day aspects of keeping the department team or organization running smoothly This includes making sure the department is staffed appropriately that the company is on target for sales that production is on target etc A leader on the other hand must be able to set goals and aspirations for the team set the tone of the organization motivate and inspire the group etc Realistically managers must be able to do both They must inspire and motivate and they must ensure that the company operates effectively Setting the ethical tone of the organization is a leadership function Business ethics are about the morally functional nature of our business relationships and so giving them the attention and care they deserve is crucial to an organization s success A number of business scandals in the recent past have generated an increase in public concern about the quality of today s leaders A basic question people ask is Why do major companies fail Naturally contemporary CEOs are quick to offer an assortment of excuses such as a weak economy or stock market problems In capitalism philosophy it is possible to find economic arguments to support the notion that only the companies that serve a useful purpose will survive The demise of numerous dot coms may reflect experimental business ideas that were not effective in serving their target market

OBJECTIVE OF THE STUDY


cases

To study the importance of ethical leadership in the functioning of an organization through live



To identify various characteristics of ethical leadership

To understand the perception of employees of different organizations about ethics and leadership in

the present scenario

ETHICAL LEADERSHIP The term ethics comes from the Greek word ethos which has been translated into a variety of terms such as disposition manners and character Ethics may be defined as 1 the analysis of concepts such as ought should duty moral rules right wrong obligation responsibility etc 2 The inquiry into the nature of morality or moral acts And 3 The search for the morally good life The above definition reveals that the term ethics has a multidimensional nature that transcends simple descriptions Ethical leadership is leadership that is involved in leading in a manner that respects the rights and dignity of others As leaders are by nature in a position of social power ethical leadership focuses on how leaders use their social power in the decisions they make actions they engage in and ways they influence others Leaders who are ethical demonstrate a level of integrity that is important for stimulating a sense of leader trustworthiness which is important for followers to accept the vision of the leader These are critical and direct components to leading ethically The character and integrity of the leader provide the basis for personal characteristics that direct a leader s ethical beliefs values and decisions Individual values and beliefs impact the ethical decisions of leaders In organizational communication ethics in leadership are very important Business leaders must make decisions that will not only benefit them but also they must think about how the other people will be effected The best leaders make known their values and their ethics and preach them in their leadership style and actions It consists of communicating complete and accurate information where there is a personal professional ethical or legal obligation to do so When practicing ethics you gain the respect and admiration of employees with the satisfaction of knowing you did the right thing If you never make clear what you want and expect then it can cause mistrust Being unethical in the workplace can include anything from taking personal phone calls while at your desk telling someone the check is in the mail when in fact it hasn t even been written yet and even taking office supplies home for your personal use Most organizations create an ethical code which is usually a list of rules that tells you what behaviors are right and what are wrong in the company Mostly ethical leaders abide by certain rules and guidelines which are known as the five standards of excellence practiced by ethical leaders

Five Standards of Excellence Practiced by Ethical Leaders

1 Ethical Communication
Ethical leaders set the standard of truth for every employee they lead The moment people take leadership positions they have an opportunity to place the highest premium on truthfulness Cases cases of fiscal malfeasance at Enron illustrate the need for every form of communication leaders put forth to be an accurate representation Yet leading by example cannot be the only process by which this standard is relayed It must become a company slogan from the accounting office to the shop floor that Truth is Job 1 Truthful information is quality information to the CEO board of directors and investors Even when statistical evidence does not reflect well on a division or the financial status of the entire company a plan of action to thwart disaster may be implemented and several lessons learned through open communication to ensure the sustainability of the organization

2 Ethical Quality An ethical leader understands that three factors ensure the global market competitiveness of an organization a quality product quality customer service and quality delivery Leaders must champion the processes of quality throughout the organization benchmarking successful organizations incorporating innovations in quality and setting standards and measurements in every department Leaders have several tools to ensure quality They don t have to be Master Black Belts in Six Sigma or understand all the intricacies of lean manufacturing or supply chain management to see how each improves quality They are sold on the merits of having a quality They know that cutting waste translates to saving time and money for the organization It is the leader s responsibility to drive steer and fund the quality initiative throughout the organization For only when top leaders fully endorse a quality initiative does it have a chance of becoming fully implemented and the harvest days of savings can occur

3 Ethical Collaboration Ethical leaders need many advisors They pick the most astute within their organizations and hire some from other companies but they surround themselves with answers Wise leaders collaborate to incorporate best practices solve problems and address the issues facing their organizations Regrettably the natural tendency of leaders is to draw in a close and more often than not closed circle of advisors Unfortunately the smaller the group the less the prospect of collectively providing the leader advice on the full range of issues facing the organization But the leader who collaborates ethically makes better decisions for the organization How is that possible Leaders who use ethical collaboration keep their circle of advisors more open and fluid The objective of the ethical leader is to reduce the risks taken by the organization by assigning trustworthy experts advisors to every situation from R D decisions to customer driven needs Advisors findings determine

decisions of the leader who becomes better equipped to make judgments based on two critical elements more feasible solutions and viable processes needed to exact the solutions 4 Ethical Succession Planning If principled leaders possess a need for control they satisfy that need by establishing strong organizational standards and operational procedures for quality and communication Yet for the long term success of the organization ethical leaders must set aside issues of turf and let other leaders surface within the company giving potential successors opportunities to exercise and build their leadership skills Once identified these few should be personally mentored by the leader given opportunities for 360 communications and trained for the roles they may one day assume 5 Ethical Tenure How long should a leader lead Whereas the most important leader in the American government leads for four to eight years industry has no governing standard to length of tenure Should leadership in industry like its counterpart in government have a shelf life The answer lies on the conduct of the leader Leadership expert Peter Block contends that We search so often in vain to find leaders we can have faith in Further he notes that leadership is more often rated on the trustworthiness of the individual than on his or her particular talents and that the mission of the ethical leader is to serve the institution and not themselves Ethical leaders collaborate and provide their organizations succession plans that ensure the growth of the organization over time They feel that they lead at the request of the company customers board of directors and stockholders If each of these entities trust in the leader remains unchallenged the leader should lead until he or she chooses to step down However whereas even the best of leaders turn the company over to a new set of watchful eyes eventually the leader who is irreparably jeopardizing the sacred trust of employees customers and the public at large should step aside and let a better leader take the helm Leaders of leading organizations following Ethical Leadership practices include

1 Lee Scott Chief executive Wal Mart the world s largest retailer 2 Stuart Rose Chief executive iconic UK retailer Marks Spencer 3 Ratan Tata Chairman Tata Group
Examples of unethical leadership

1 Ken Lay Former CEO of the energy company Enron during its collapse 2 Martha Stewart Entrepreneur Media personality and billionaire Lifestyle guide that served time in prison
for insider trading

3 B Ramalinga Raju Satyam Fraud Case

METHODOLOGY Research Approach The research approach used in the present report is analysis of live cases of leaders who have exhibited ethical and non ethical behaviour in their respective organizations Also a survey was conducted amongst the present employees of different organization to understand their perception of ethical leadership and its relevance in their workplace Sampling Plan

a Sampling unit
The survey is targeted at general people who are presently working as employees in different organizations

b Sampling Size
Size was fixed as 30 respondents

c Sampling Media
The internet is used as the sampling media The questionnaire is mailed to each of the respondent and they were asked to fill it online

LIVE CASES ANALYSIS
ETHICAL LEADERSHIP
LEE SCOTT CHIEF EXECUTIVE WAL MART About Lee Scott H Lee Scott Jr is an American businessman who served as the third chief executive officer of Wal Mart from January 2000 to January 2009 Scott originally joined Wal Mart in 1979 Wal Mart Stores Inc branded as Wal Mart is an American public corporation that runs a chain of large discount department stores It is the world s largest public corporation by revenue according to the 2008 Fortune Global 500 4 The company was founded by Sam Walton in 1962 incorporated on October 31 1969 and listed on the New York Stock Exchange in 1972 Wal Mart is the largest private employer and the largest grocery retailer in the United States Scott was born and raised in Baxter Springs Kansas and graduated with a degree in business from Pittsburg State University in Kansas He is married to Linda G Scott and has two children The family has residences in Arkansas and California Scott was named to the TIME magazine list of the hundred most influential people in 2004 and 2005 Under his leadership the company retained its position as the largest retailer in the world based on revenue although the company faced growing criticism during his tenure for its environmental footprint labor practices and economic impact Criticism faced by Walmart Wal Mart frequently came under criticisms by the media and the public during Scott s tenure Among other criticisms Wal Mart was questioned for its trade with China and for its labor policies Critics have also charged Wal Mart with implementing policies detrimental or unfair to retail store employees such as low hourly wages and anti labor union policies For the past year or so it has been creating ripples in the Sustainability field The ripples were for two reasons One should Walmart be believed and two if what Walmart is saying is true then it can effect the whole business world due to the size and influence of the organization Response of Lee Scott In February 2007 evidently in response to the criticisms Scott launched Sustainability 360 during a keynote lecture at Prince of Wales s Business and Environment Program 1 in London In his speech titled Leadership in the 21st Century he outlined the need for sustainability and three ambitious goals for the corporation 1 To be supplied 100 percent by renewable energy 2 To create zero waste and 3 To sell products that sustains our resources and the environment Sustainability 360 takes in our entire company our customer base our supplier base our associates the products on our shelves the communities we serve said Scott And we believe every business can look at sustainability in this way In fact in light of current environmental trends we believe they will and soon As an example of this way of working Scott also announced the company s intention to introduce Global Innovation Projects one of which is a challenge for Wal Mart associates and suppliers to start thinking about how to remove nonrenewable energy from the products the company sells

Perhaps the most far reaching opportunity we have with our suppliers is a simple idea with potentially profound consequences said Scott Just think about this What if we worked with our suppliers to take nonrenewable energy off our shelves and out of the lives of our customers We could create metrics and share best practices so our suppliers could make products that rely less and less on carbon based energy Recognizing longtime actions in sustainability from U K subsidiary ASDA Scott highlighted how initiatives taking place at Wal Mart s operations in the United Kingdom fit in this idea including reducing packaging on food products by 25 percent and selling more energy efficient light bulbs than standard bulbs by 2008 Addressing the different planks of Sustainability 360 Scott highlighted Wal Mart s initiative to work with suppliers to reduce packaging by 5 percent by 2013 an effort estimated as being equal to removing 213 000 trucks from the road and saving approximately 324 000 tons of coal and 67 million gallons of diesel fuel per year He also talked about the company s goal to develop partnerships that help suppliers run more sustainable businesses and factories

Emphasizing that sustainability is consistent with the company s culture Scott also discussed the integral role that associates play in helping Wal Mart reach its objectives Scott acknowledged that the journey to a sustainable corporation is long but stressed all businesses have a role to play We all have an opportunity to be more sustainable But even more we have a responsibility We need to be sustainable companies and countries made up of people who live sustainable lives If we do that if we do it throughout the coming decades I believe we will make sustainability sustainable And this generation will leave a healthier humanity and a healthier planet to future generations In a speech in which Scott sounded as much social philosopher as he did corporate chieftain Scott told the store managers We live in a time when people are losing confidence in the ability of government to solve problems But Wal Mart he said does not wait for someone else to solve problems In his corporate social manifesto Scott laid out a massive agenda for the company on numerous social ethical health and environmental issues many of which were a complete surprise to the assembled store managers For example he announced that Wal Mart is talking to leaders of the automobile industry about selling electric and hybrid cars He added that the company might even install wind turbines in its store parking lots so customers could recharge their cars with renewable Wal Mart energy

STUART ROSE CHIEF EXECUTIVE MARKS SPENCER About Stuart Rose Sir Stuart Alan Ransom Rose born 17 March 1949 Gosport Hampshire is the executive chairman of the British retailer Marks Spencer The boss of Marks and Spencer had a track record for turning around struggling retailers when he was pinched from Top Shop owner Arcadia to head up M S once again in the summer of 2004 For this role he is paid an annual salary of 1 130 000 Background Stuart Rose s grandparents were White Russian migr s who fled to China after the 1917 revolution His original family name was Bryantzeff his father ex RAF and civil servant changed it Rose went to the catholic St Joseph s Convent School in Dar es Salaam until he was 11 Tanzania and the independent Bootham School in York His first job was as an administration assistant at the BBC His mother committed suicide when he was in his twenties He lives in central London and Suffolk He married Jennifer Cook in 1973 in St Marylebone and they have a son and daughter Timeline of stuart rose 1949 Born 17 March Educated Bootham School York 1972 Trainee Marks Spencer 1987 Made commercial executive Europe for M S based in Paris 1989 Joined Debenhams 1991 Appointed head of Evans later runs Dorothy Perkins 1998 CEO Argos then runs Booker 2000 CEO Arcadia 2002 Leaves as Arcadia is sold to Philip Green 2004 CEO M S till may 2009 Career Stuart Rose first joined Marks Spencer in 1972 as a management trainee Rose remained with Marks Spencer until 1989 when he joined the Burton Group as Chief Executive in 1994 The Burton Group de merged forming the Arcadia and Debenhams businesses In 1997 he joined Argos as Chief Executive where he was appointed to defend the company from a takeover bid from the catalogue giant Great Universal Stores GUS GUS did however take control of Argos but it has been reported that Rose succeeded in negotiating an increased price for the retailer In a turbulent time in its history Rose became the Chief Executive of Booker plc where he oversaw the merger of the company with Iceland to form the Big Food Group Rose joined the Arcadia Group in 2000 as Chief Executive and left in 2002 following its acquisition Rose turned around the fortunes of the Arcadia Group and sold the group for over 800m netting himself around 25m as part of the deal

He was appointed to the position of Chief Executive of Marks Spencer in May 2004 at the age of 56 and subsequently fought off several takeover bids by Philip Green for the Group Rose appeared to be rejuvenating the Marks Spencer Group as he did at Arcadia In January 2007 he was named the 2006 Business Leader of the Year by the World Leadership Forum for his efforts in restoring the fortunes of Marks and Spencer He was knighted in the 2008 New Year Honours and was appointed President of Business in the Community on January 1 2008 On March 10 2008 it was reported that Sir Stuart will become Executive Chairman of Marks Spencer from June 1 2008 However in the light of a recent profits warning which sparked an unprecedented thirty per cent plus plunge in the company s shares this appointment has caused some concern to many shareholders Nevertheless they voted to re appoint him at their annual meeting on July 9 2008 Stuart Alan Ransom Rose served as the Chief Executive Officer of Marks Spencer Group Plc until May 2009 Ethical characteristics Stuart Rose valued the employees and the interests of his co businessmen and he never tried to exploit them As Marks Spencer chief executive Stuart Rose has defended as integral to the company s future his plan to turn the company into Britain s most ethical retailer He has a major concern for the environment and implemented many policies which are in the best interest of saving the environment In an interview with the Daily Telegraph newspaper Stuart Rose said that he wished he had been able to complete M S s store modernisation a year earlier but overall he had few regrets An ethical business can be a profitable business he insisted and we have proved it here and now quite categorically When some supply chain organisations challenged M S s ambitions on labour standards it reacted quickly to their advice by hiring additional in country inspectors and by working with them to develop ethical model factories in order to identify best practices According to Sir Stuart charging customers slightly more for products is a worthwhile pay off for having an ethically sound business He believes that the trend for ever cheaper clothing in the UK is shameful Stuart Rose formulated his plan A with five commitment areas of carbon emissions waste sustainable sourcing ethical trading and healthy lifestyles This clearly states his intensions on the environmental concerns Stuart has designed the Plan A which is a list of 100 commitments including no more sending waste to landfill and becoming carbon neutral by 2012 and vaguer targets such as sourcing as much food as possible from the UK and Republic of Ireland The 100 point Plan A initiative has delivered much from lower carbon emissions and green energy production to new ranges of fair trade organic recycled and energy efficient products Example Greening the garment supply chain in Sri Lanka Peer beyond the thick plant overhangs and through the glass walls of the Thurulie lingerie factory in Sri Lanka and amazing as it seems you catch a glimpse of the future of UK manufacturing

Thurulie opened in June 2008 as part of Marks Spencer s Plan A green factories initiative employs a wide array of environmentally responsible building techniques and materials as well as alternative forms of energy such as solar wind and hydropower which make the operation entirely carbon neutral

RATAN TATA CHAIRMAN TATA GROUP Introduction Ratan Naval Tata born December 28 1937 in Bombay is the present Chairman of the Tata Group a leading India conglomerate established by earlier generations of his family He was instrumental in setting up the Tata Foundation which through varied and extensive programmes sponsors a multitude of social causes In 1981 Ratan Tata became the Chairman of Tata Industries and was instrumental in ushering in a wide array of reforms It was under his stewardship that Tata Consultancy Services went public and Tata Motors was listed in the New York Stock Exchange He was awarded the Padma Bhushan by the Government of India in January 2000 He serves on the boards of several leading organizations both in the public as well as the private sector in India He is a member of the International Investment Council set up by the President of South Africa and serves on the programme board of the Bill Melinda Gates Foundation s India AIDS initiative He is credited with leading the Tatas successful bid for Corus an Anglo Dutch steel and aluminum producer which was acquired by Tata Sons for an estimated 6 7 billion in January 2007 On December 05 2005 Ratan Tata was awarded the Quality of Life Award at the United Nations in New York College of Human Sciences launched the International Quality of Life Awards as an annual occasion to honor people and partnerships who make significant contributions in the spirit of the College s own mission to individual family and community well being and quality of life locally and internationally Ratan Tata chairman of the Tata Group India s largest corporation and one that exemplifies corporate philanthropy The Tata Group returns two thirds of its profits to the people of India in the form of improvements and contributions that benefit education health arts culture and environmental conservation Recognized this year as Forbes Asian Businessman of the Year Tata s nearly 18 billion conglomerate equivalent to 2 8 percent of India s gross domestic product is recognized globally for its high ethical standards and its focus on social responsibility Examples of Ethical Leadership by Ratan Tata Industry observers say Tata not only preaches ethics and corporate governance but implements them in letter and spirit He has the ability to call a spade a spade Much before corporate governance became a catch phrase with India Inc Tata did not hesitate to file a criminal case against one of his perceived close lieutenants and a top executive of the group for allegedly defrauding one of his companies His deep interest in following ethical principles while doing business is visible in the codes of ethics set by his company and also by the ethical decisions taken by the company in different situations in spite of having to incur losses because of them Ethical Principles of Tata Group Tata Group has more than a code of ethics they have a Code of Conduct in which a Code of Ethics is embedded Since it specifically addresses behavior this is much stronger and further insures that ethical behavior will take place

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Tata is a rarity in the world community of corporations They have been in existence for over 100 years due no doubt to their tenacious focus on ethics from the CEO to line employees Tata is a unique company even for India where there is government corruption Its rigid ethical standards are so well established that corrupt officials typically don t even bother asking Tata executives for bribes The company has walked away from industries like Bollywood films known for questionable cash deals The Tata philosophy it is not the quantity of wealth created but what a firm does with that wealth that sets ethical companies apart The Group has long believed that it must give back to the people from the wealth it creates Clearly though unless one first generates wealth there can be nothing in hand to redistribute Charity must follow wealth generation and not replace it However instead of creating individual wealth the Group s profits are used to start hospitals educational facilities and other social projects Thus despite the Group s obvious success no Tata name figures in any list of the 10 richest people or even the 100 000 richest Positives of Ethics CSR as a business driver A good example of how ethics can drive profitability is the operations of the Tata coal mines in Bokaro Jharkhand Today Tata Steel is one of the world s lowest cost steel producers mainly on account of its access to exceptionally low cost coal less than one tenth the cost of imported coal While the Bokaro area is now infested with Naxalites the Tata operations there continue uninterrupted and supply 50 of Tata Steel s total requirements The reason for this is simple for the last 30 40 years the Group has comprehensively looked after the community through its CSR programme This includes providing educational and medical facilities building roads combating epidemics etc in other words doing what a government is meant to do As in other areas where Tata operates this stems from a belief that prosperity cannot survive in a sea of misery and more fundamentally because it is the right thing to do Weighing the costs and benefits of the programme there is little doubt that it makes business sense Its cost a little over Rs 1 crore a year pales in comparison with the losses from any potential disruption to the mining operations Substituting one day s worth of output from Bokaro 10 000 tonnes with imported coal costing Rs 6 000 7 000 more per tonne would cost Tata Steel Rs 6 7 crore Thus a disruption of several days would cost as much as the entire CSR programme has in its entire existence Clearly while the aim of the programme is altruistic it has proven financially rewarding as well Example of Ethical Decision by Tata Group There is a prominent case which is still in court of the MD of a Group company attempting to walk away with clients money When this affair was exposed the Tatas did not try to sweep it under the carpet Instead even while under no legal obligation to do so they decided to return what people had lost Although this created a massive financial hole Tatas accepted the moral responsibility of filling that hole Further they ensured that the person involved was caught and put behind bars There is a simple process in place to facilitate honesty that is not to tolerate even a minor case of dishonesty All employees are made aware that there are four ways to leave the company death retirement a voluntary shift or having a case of dishonesty proved against oneself So ingrained is this idea that even the unions do not take up a case on behalf of a dishonest person There is moreover a culture of openness with

not just employees but vendors and customers being encouraged to speak freely and without fear of reprisal There are also ethics counselors and an ethics manual is in place which is now being amended to reflect the evolving and more international nature of the Group Any charges made under anonymity are considered baseless and rejected But the concept of whistle blowers is supported most seriously and every allegation by identified personnel pursued to ensure justice

CASES OF UNETHICAL LEADERSHIP
KEN LAY FORMER CEO ENRON About Ken Lay Kenneth Lee Ken Lay April 15 1942 July 5 2006 was an American businessman best known for his role in the widely reported corruption scandal that led to the downfall of Enron Corporation Lay and Enron became synonymous with corporate abuse and accounting fraud when the scandal broke in 2001 Lay was the CEO and chairman of Enron from 1985 until his resignation on January 23 2003 except for a few months in 2000 when he was chairman and Jeffrey Skilling was CEO Career Lay worked in the early 70s as a federal energy regulator He then became undersecretary for the Department of the Interior before he returned to the business world as an executive at Florida Gas By the time energy was deregulated in the 1980s Lay was already an energy company executive and he took advantage of the new climate when Omahabased Internorth bought his company Houston Natural Gas and changed the name to Enron in 1985 The much larger better capitalized and more diversified Internorth was then used as an asset to propel his efforts at Enron He also was a member of the board of directors of Eli Lilly and Company About Enron 1985 Founding years Enron s dramatic expansion and rise to international prominence Enron was born in July 1985 when Houston Natural Gas merged with Omaha based InterNorth Kenneth Lay an energy economist who had held academic and government positions throughout his career became chairman and chief executive His ambitions for the new company he had helped form went beyond the business of piping gas He wanted to see an energy trading revolution and place Enron at the heart of it By 2001 he appeared to be succeeding in his goal having created a multinational corporation employing thousands with a turnover of billions of dollars 1980s Energy deregulation Power business became big business In the 1980s energy corporations lobbied Washington to deregulate the business Companies including Enron said the extra competition would benefit both companies and consumers Washington began to lift controls on who could produce energy and how it was sold New suppliers came to the market and competition increased But the price of energy became more volatile in the free market Enron saw its chance to make money out of these fluctuations It decided to act as middle man and guarantee stable prices taking its own cut along the way 1980s Trading futures Enron took a bet on energy Kenneth Lay had been anxious to expand the business right from the word go Jeff Skilling an ambitious thinker from the world famous consultancy firm McKinsey offered a way to do it Skilling believed that Enron could profit from trading futures in gas contracts between suppliers and consumers effectively betting against future movements in the

price of gas generated energy Buyers and sellers use futures markets to get what they hope will be a better deal on commodity prices than they would do on the open market Enron offered to do the same with gas by buying and selling tomorrow s gas at a fixed price today In the deregulated energy world it appeared to make sense to many suppliers and industry consumers who took up the offer The new Enron was emerging 1990s Market making creating a commodities business on Energy Alley In a few short years Enron became a massive player in the US energy market controlling at its height a quarter of all gas business Buoyed by the success the company went on to create markets in myriad energy related products Enron began to offer companies the chance to hedge against the risk of adverse price movements in a range of commodities including steel and coal By the end of the decade it had expanded its trading arm to include hedging against external factors such as weather risk 1989 2001 Enron and Washington Lobbying and donations on Capitol Hill Enron certainly wasn t the only company lobbying for energy deregulation but deregulation helped Enron establish the trading markets that became its core business Directors built relationships with both Democrats and Republicans Kenneth Lay himself had strong personal ties to two Republican presidents George Bush Snr and his son George W Bush As Enron expanded there was little scrutiny of how it was managing the expansion But when it began to unravel the questions began to pour in Early 2000 Dot com boom Enron invests in the dot com boom but are its profits all they seem Enron began 2000 with a plan to move into broadband internet networks and trade bandwidth capacity as the dot com economy prospered Enron s dynamic ideas coupled with its stable old economy energy background appealed to investors and the share price soared At about this time it is believed that Enron began to use sophisticated accounting techniques to keep its share price high raise investment against it own assets and stock and maintain the impression of a highly successful company Enron could also legally remove losses from its books if it passed these assets to an independent partnership Equally investment money flowing into Enron from new partnerships ended up on the books as profits even though it was linked to specific ventures that were not yet up and running One of these partnership deals was to distribute Blockbuster videos by broadband connections The plan fell through but Enron had already posted some 110m venture capital cash as profit

Late 2000 Trouble brewing Enron continues to expand but problems loom By the summer Enron s shares had hit an all time high of more than 90 But there was also controversy California was suffering an energy crisis blamed by many on its poor handling of deregulation Some claimed Enron had profiteered by buying futures in electricity supplies and passing them on at higher costs Enron dismissed the allegation saying it was merely the market maker Enron s 2000 annual report reported global revenues of 100bn

Income had risen by 40 in three years In reality real revenue would have been far lower had it not been for the special partnerships established by chief finance officer Andrew Fastow Early 2001 Stock heading south Enron remains bullish but stock begins to slide Enron and Kenneth Lay each donated 100 000 to incoming President Bush s inaugural committee fund early in 2001 The incoming president invited Mr Lay to become an advisor to his transition team A prime concern for Enron was the new president s planned energy policy review headed by Vice President Dick Cheney Mr Lay and other Enron directors met Mr Cheney and others three times in the first half of the year the last meeting a month before he published his conclusions on 17 May 2001 The review as predicted was favorable to the energy industry It advocated more power stations more exploration and a national grid While it did not meet all of Enron s wishes it nevertheless was good news August 2001 Crisis revealed Jeff Skilling quits and an insider gets suspicious On 14 August 2001 seemingly from nowhere Jeff Skilling resigned as chief executive citing personal reasons Kenneth Lay became chief executive once again The development was a shock to investors who suddenly began to fear that all was not well in Houston Investors sold millions of shares knocking some 4 off the price by the end of the week As the price dropped below 40 Mr Lay insisted that there were no issues But there was a very large issue perhaps one that the board was not fully aware of In May of that year Enron executive Clifford Baxter left the company apparently in uncontroversial circumstances But there were rumors among executives that Mr Baxter soon to become a tragic figure in the affair when he took his own life had clashed with Jeff Skilling over the propriety of some of the partnership transactions When Mr Skilling resigned one executive who knew of Mr Baxter s concerns decided to act and warned Mr Lay that Enron was on the verge of imploding October 2001 Enron crashes Stock market panic as a giant falls Meanwhile the depth of Enron s problems was beginning to dawn on Andersen Because Enron had hedged against its own stock it could never recover its losses while its share price was falling Andersen told Enron that it had no other choice but to change the way it was accounting for its special partnerships On 12 October an Andersen lawyer contacted a senior partner in Houston to remind him that company policy was not to retain documents that were no longer needed At some point after this staff in Andersen s Houston office began shredding documents relating to Enron Around the same time Enron s internal legal examination of Sherron Watkin s concerns concluded that the partnerships in question Raptor and Condor had been approved by Andersen November 2001 The final days Enron struggles to stay afloat and scrambles for a merger 1 9 November Despite the air of impending doom Kenneth Lay found two banks willing to extend credit But the worst of revelations was to come On 8 November the company took the highly unusual move of restating its profits for the

past four years It effectively admitted that it had inflated its profits by concealing debts in the complicated partnership arrangements The following day the humiliation of Enron appeared complete as it entered negotiations to be taken over by its much smaller rival Dynegy ENRON S ACCOUNTS THE TRUE PICTURE Reported Income 1997 105m 1998 733m 1999 893m 2000 979m December 2001 Bankrupt 2 Dec No longer able to cope with its debt Enron filed for bankruptcy protection in a New York court on 2 December 2001 simultaneously launching a legal action against Dynegy for pulling out of the merger In three months Enron had gone from being a company claiming assets worth almost 62bn to bankruptcy Its share price collapsed from about 95 to below 1 Uncertainty has severely impacted the market s confidence in Enron and its trading operations Kenneth Lay commented as he saw his company implode We are taking the steps announced today to help preserve capital stabilize our business and enhance our confidence to pay our creditors January 2002 Investigation America demands answers as a former executive takes his own life 9 10 Jan While America reeled from the bankruptcy and Enron employees past and present worked out what they had left the Justice Dept announced a criminal investigation Attorney General John Ashcroft who had received campaign funds from the company in 2000 excluded himself from the investigation along with the 100 federal investigators in Houston The following day Andersen its role increasingly in the spotlight admitted that employees had disposed of Enron documents The White House also confirmed speculation that Kenneth Lay had appealed to members of the administration for help February 2002 Hearings Enron affair takes centre stage on Capitol Hill Four of Enron s most senior executives pleaded Fifth Amendment protection against self incrimination and refused to testify Andrew Fastow chief risk officer Richard Buy finance executive Michael Kopper and Kenneth Lay himself Jeff Skilling did testify but insisted that he knew nothing of the complex web of intra company deals that are almost impossible for ordinary investors to unravel On Valentine s Day the woman who originally raised fears of an implosion took the stand Sherron Watkins said that Ken Lay and the board had been duped by Mr Fastow and Mr Skilling Mr Lay had never really understood the gravity of the situation she said LAY S LEADERSHIP AND CHARACTER Revised Income 77 m 600m 645m 880m True debt Up 771m Up 561 m Up 685m Up 628m True equity Down 258m Down 391 m Down 701 m Down 754 m

Kenneth Lay s empire falls leaving investors and employees stranded

Anyone even vaguely familiar with Enron knew well before its collapse that suspicious minds not trusting hearts ruled its organizational body It was a culture of manipulation infighting backstabbing and fuzzy math Management constructed this house on the sands of deception lies and fraud instead of building it on the solid foundation of trust and transparency Lay once proudly touted his company s values with words such as integrity but now it is known those words were hollow Any remnant of integrity was lost the day he and his board voted twice to lift the conflict of interest rules for his CFO to play his games with off balance sheet partnerships both for the benefit of his and his employer s crooked gain Guilty or not Lay wasn t minding the store and allowed a culture of craven greed distrust and deception to fester It ought to be the first Enron lesson for any corporate leader or board Also indisputable is the utter lack of leadership Stephen Cooper the turnaround guru whom Enron hired to lead it through bankruptcy found that 99 percent of Enron s problems weren t market driven but leadership related a massive breakdown in accountability and governance A closer look at the ruins finds not only a consistent manipulation of accounting rules but also a pattern of careless recruitment practices Enron recruits were frequently hired merely on academic credentials innovative ideas and raw ambition Vetting was as common a word used in the vocabulary of Enron as virtue Fastow was recruited from Continental Illinois Bank where he helped pioneer a system of raising capital by selling notes backed by risky loans When former Enron Treasurer Ben Glisan who is serving a five year prison term for his Enron crimes told Lay in late October 2001 about his 1 million windfall from one of the secret Enron side deals Glisan offered his resignation But according to Glisan s Enron testimony Lay said no and told him he wanted him to stay on Reasons for Enron s downfall

1 Charismatic Leadership Dissent and Leadership Privileges There is ample evidence that Enron s leadership
aimed at creating an aura of charisma around themselves and that in consequence they evinced each of the major defects identified by Conger 1990 Consistent with their image in the business press Enron s leaders engaged in dramatic forms of self promotion Nevertheless he was also described by Fortune magazine as a revolutionary Jeffrey Skilling was equally adept at promoting a charismatic self image Consistent with a companywide dramaturgical predilection for Star Wars analogies Cruver recounts that he was known internally as Darth Vader a master of the energy universe who had the ability to control people s minds He was at the peak of his strength and he intimidated everyone He had been lured over to the Dark Side from McKinsey Company in 1990 He dressed for the part at company gatherings referred to his traders as Storm Troopers and decorated his home in a style sympathetic to the Darth Vader image Skilling was also sometimes known as The Prince after Machiavelli New recruits were instructed to read The Prince from beginning to end or be eaten alive Dramatic nomenclatures were not uncommon Another senior executive Rebecca Mark became known as Mark the Shark with all its attendant overtones of predatory aggression and greater competitive power

2 Individual Consideration Love Bombing and the Process of Conversion

Recruitment at Enron was a particularly grueling procedure Fusaro and Miller reported

that

job

candidates had to demonstrate that they could maintain high levels of work intensity over an extended period of time Some have compared the work environment and high employee intensity at Enron to that of a top law firm which is typically filled partner It was their with brilliant young associates willing to do whatever it takes to make hours to clear that those selected would be required to devote most of their waking

new life as Enron employees In this regard as has already been highlighted Enron certainly delivered on expectations After the initial interview they then attended a second interview

on one of three to five Super Saturdays that were held at Enron s Houston office Candidates were interviewed for 50 minutes by eight different interviewers in succession with one 10 minute break an emotionally intense experience for all Initially prospective employees staged a dramatic performance designed to convince the recruiter that they view the company s vision with the mindset of True Believers even if they felt doubts a normal aspect of impression management during selection interviews However performance has hazards As Goffman stressed one finds that the performer can be fully taken in by his own act he can be sincerely convinced that the impression of reality which he stages is the real reality The further emulation of organizational rituals heightens the effect

3 Promoting a Common Culture
Rank and yank and the elimination of dissent Side by side with largesse and ego stroking a punitive internal culture was established in which all that had been so painstakingly gained could be withdrawn at the whim of senior managers As Fusaro and Miller remarked Despite all the effort that Enron expended in selecting the right people to hire into the company it was quick to fire them The most striking illustration of this was in the organization s appraisal system known as rank and yank An internal Performance Review Committee PRC rated employees twice a year They were graded on a scale of 1 to 5 on ten separate criteria and then divided into one of three groups A s who were to be challenged and given large rewards B s who were to be encouraged and affirmed and C s who were told to shape up or ship out Those in the top category were referred to as water walkers Those in the bottom category were given until their next review to improve In practice however with another 15 percent category emerging within six months sufficient improvement was almost impossible and they tended to leave quickly Furthermore those in categories 2 and 3 were also now in a position where they too faced the strong possibility of being yanked within the next year A cutthroat culture was queried created Thus within Enron it was clear to all that dissent would not be tolerated Anyone who

accountancy practices was likely at best to be reassigned or lose a bonus A 1995 survey of employees found that many were uncomfortable about voicing their feelings and telling it like it is at Enron quotes a former senior s manager s summary of the internal culture There was an unwritten rule a rule of no bad news If I came to them with bad news it would only hurt my career Conclusion Many of the dynamics found within Enron resemble those of organizations generally regarded as cults In particular it has described the existence and the downsides of charismatic leadership a compelling and totalistic vision intellectual stimulation aimed at transforming employees goals while subordinating their ethical sense to the needs of the

corporation individual consideration designed to shape behavior and the promotion of a common culture which was increasingly maintained by punitive means The one exception is that cult members donate most of their money and possessions to their chosen cause They endure great hardship Enronians by contrast were well paid with the promise of much greater wealth to come On the other hand most saw their retirement savings wiped out in Enron s collapse lost everything they had invested in its shares and received nothing more than a 4000 severance payment when it filed for bankruptcy while top managers were paid exceptionally generous retention bonuses Overall the organizational culture strongly resembles that of many well known cults as does the behavior of Enron s leaders There have been many attempts to portray the Enron scandal as a one off or at least rare occurrence In particular President Bush characterized it as the product of poor behavior by a few bad apples and therefore as an exceptional event Others have noted that many business commentators have effectively used Enron as a scapegoat standing as a surrogate for a wider corporate malaise that is hence denied In even more optimistic vein as Deakin and Konzelmann 2003 have critically observed the exposure and then collapse of Enron has been used by some to argue that we can be more confident in corporate America and its regulatory regimes In particular recent years have witnessed an extraordinary growth in the power of CEOs while the power of employees has declined But a corollary of great power is the anticipation of miraculous results Such expectations are magnified in a context of social despair or helplessness Imperial CEOs all too aware of the limited opportunity they are now afforded by the stock market to make a dramatic difference may be tempted to resort to the theatrical approaches typical of cult leaders and which were certainly the norms at Enron In the process they encourage conformity and penalize dissent Yet the evidence indicates that effective leaders need to do the opposite and in particular should encourage constructive dissent rather than destructive consent Enron suggests that many if not most leaders have yet to grasp this point with potentially catastrophic results for their organizations Thus more leaders are attempting to bind employees to the corporate ideal while curtailing forums for debate They project an image of charismatic leadership stress a compelling vision depict their companies as a surrogate family and attempt to blur any perceived difference between the interests of managers and non managers As an example of where this may lead there has been a growing interest in Spiritual Management Development Within this paradigm trainers attempt to release managers from negative thoughts fears or barriers which impede the development of a successful corporate culture Such approaches seek to re engineer the most intimate beliefs of employees so that they are aligned with whatever the leader deems is helpful to the corporate enterprise It makes it even less likely that employees will ask awkward questions of their leaders and so be capable of correcting their inevitable misjudgments These may constitute fertile conditions for the emergence of other Enrons in the future The dangers are considerable Once people over align themselves with a company and invest excessive faith in the wisdom of its leaders they are liable to lose their original sense of identity tolerate ethical lapses they would have previously deplored find a new possibly corrosive value system taking root and leave themselves vulnerable to manipulation by the leaders of the organization and to whom they have mistakenly entrusted many of their vital interests Enron traded on the desire of many people to believe that ever increasing profits could be manufactured by means of accountancy conjuring tricks by an organization that was also serving a greater good a secular miracle In

that context as we have argued above it may bequeath a cultural legacy that other business leaders increasingly seek to emulate The phenomenon of corporate cultism may thus become more widespread and require much closer study than it has merited to date

MARTHA STEWART ENTREPRENEUR MEDIA PERSONALITY AND BILLIONAIRE LIFESTYLE GUIDE Who is Martha Stewart Martha Helen Stewart is an American business magnate television host author and magazine publisher As founder of Martha Stewart Living Omnimedia she has gained success through a variety of business ventures encompassing publishing broadcasting and merchandising Stewart s syndicated talk show Martha is broadcast throughout the world she has written numerous bestselling books and she is the publisher of Martha Stewart Living magazine In 2001 Stewart was named the third most powerful woman in America by Ladies Home Journal A BRIEF CAREER HISTORY Martha Stewart began her career as a model She was hired and appeared in several television commercials and magazines Martha was a very good student versatile activist in several organizations and a successful model That helped her get a scholarship in Barnard College in New York where she graduated in two mayors History and Architectural History In 1967 Stewart worked briefly as a Wall Street stockbroker before finding her calling as a domestic diva when she launched a catering business from the basement of her Connecticut home Stewart grew her catering business and built a reputation as an expert in entertaining Her first book Entertaining was a huge success and soon led to television appearances more books and a gig as Kmart spokesperson in 1987 In 1990 Martha Stewart Living magazine launched and Martha Stewart Weddings was published A few years later Stewart got her own syndicated TV show and launched a line of home products She was also in the boards of The New York Stock Exchange and Revlon Cosmetics The IN FAMOUS ImCLONE CASE ImClone Systems Incorporated is a biopharmaceutical company dedicated to developing biologic medicines in the area of oncology Martha Stewart had close links with Peter E Bacanovic of Merrill Lynch and the owner of ImClone Systems Samuel D Waksal She bought 5 000 shares of ImClone several years ago and became one of the major shareholders of the company On Dec 28 2001 ImClone s stock price dropped sharply when its drug Erbitux an experimental monoclonal antibody failed to get the expected Food and Drug Administration FDA approval It was later revealed by the U S Securities and Exchange Commission that prior to the announcement after the close of trading on December 28 of the FDA s decision numerous executives sold their stock and Martha Stewart was one of them Its founder Samuel D Waksal was arrested in 2002 on insider trading charges for informing friends and family to sell their stock and attempting to sell his own Martha Stewart became embroiled in the scandal after it emerged that she sold about 230 000 in ImClone shares on December 27 saving her from a loss of some 51 000 just a day before the announcement of FDA decision The day following her sale the stock value fell 18

It was surely among the highest profile white collar crime cases of the recent era The accused has been a highly visible celebrity for many years the founder of a vast lifestyle media empire with her own magazine TV show and best selling books as well as a successful home furnishing products line From a widely admired person she turned into a widely mocked envied and disliked one She was found guilty and sentenced on July 16 2004 to five months in prison five months of home confinement and two years probation for lying about a stock sale conspiracy and obstruction of justice Her trial and investigation lasted for two years ending with her being found guilty of charges and convicted to spend time in jail home arrest and probation Her actions were considered outlaw unethical and unprofessional In a celebrity obsessed culture the immense media coverage when she was investigated for alleged insider trading was quite predictable Although by some criteria the specific case against her was quite limited in scope certainly in comparison with other cases emerging during this period such as those involving Enron and WorldCom the profound contradictions between Martha Stewart s standing as a phenomenally successful businesswoman and source of inspiration to vast numbers of people attempting to enhance their lifestyle and the prospect of her status as a convicted felon and prison inmate was inevitably fascinating to a large swath of the American public The inside trading case highlighted the following unethical acts she committed

i Being a major shareholder of the company and a good friend of the owner she didn t raise her objection
when she came to know about this illegal and unethical act The FDA action was expected to cause ImClone shares to decline And Martha was fully aware of it Ethics say that a leader should always raise his her voice against any form of injustice fraud done to the stakeholders of the company

ii Being a major shareholder in the company she only focussed on avoiding her loss
and didn t thought about the other stakeholders of the company She knew that the company s shares will be crashing down creating massive losses for all the shareholders but only focussed on avoiding her losses

iii She sold her stock to other investors who were not aware the doom ImClone has in store for it due to which
those investors not privy to a heads up on Imclone s impending stock decline sustained real losses by purchasing Stewart s dumped stocks

iv Stewart committed securities fraud and obstruction of justice v In her defence she falsely claimed that there was an agreement to sell her shares when they fell to 60 00
Stewart lied to cover up her unethical deeds

vi She used the non public information to maintain her material gains By this she exercised the undue
advantage she had over other stakeholders to save herself from loss when all others were ignorant about the forthcoming losses As per law all investors are expected to make decisions based on the same information Hence what Martha did was illegal and unethical on her part Stewart was found guilty in March 2004 of insider trading conspiracy obstruction of an agency proceeding and making false statements to federal investigators and sentenced in July 2004 to serve a five month term in a federal

correctional facility and a two year period of supervised release to include five months of home confinement The judge gave the final decision saying This is a victory for the little guys No one is above the law The judgement pressed upon the fact that unethical practices in business always welcome severe punishment Being a leader a person should always remember ethics before taking any decision and should always think whether what he she is doing is fair or not

B RAMALINGA RAJU SATYAM FRAUD CASE RAMALINGA RAJU The case discusses the rise and subsequent fall of one of the visionary leaders in the Indian IT sector Ramalinga Raju Raju US educated Raju founded Satyam Computers Services Limited Satyam and under his leadership the company grew to become one of the leading IT services companies in the world In an announcement that surprised the IT and investor communities both in India and across the world Raju confessed to a major accounting fraud that marked his fall drawing comparisons to Bernard Madoff The case examines in detail the inception and growth of Satyam vision and leadership skills of Raju the problems Satyam faced due to growing competition the Maytas fiasco and the events leading to confession of accounting fraud by Raju Satyam is India s sub prime crisis and the effects will be long and painful as the corruption in the system is unravelled It will reach the highest echelons of our corporate world for Raju could not have perpetrated this fraud at this level and for so long alone It needed the collusion of the banks the accountants and the government And I would bet that he knows that he will be let off lightly as the investigations will be somehow stopped before it engulfs the whole system On January 07 2009 B Ramalinga Raju Raju Founder and Chairman of India s fourth largest IT services company Satyam Computer Services Limited Satyam claimed that the company had been inflating the revenue and profit figures for several years He confessed to an accounting fraud that amounted to Rs 70 billion 4 In a letter addressed to the board of directors of the company he declared that the Rs 50 billion of cash balances reported by Satyam for the quarter ending September 30 2008 did not exist that the revenues were Rs 21 12 billion as against Rs 27 billion reported earlier and the operating margins were only 3 as against the 24 declared by the company earlier He wrote that the gap arose due to the difference between actual profits and the profits reported which kept on growing over the years In his confession Raju wrote Every attempt made to eliminate the gap failed As the promoters held a small percentage of equity the concern was that poor performance would result in the takeover thereby exposing the gap It was like riding a tiger not knowing how to get off without being eaten Confessing fraud in his letter to the board of Satyam Satyam Computer s founder and Chairman B Ramalinga Raju wrote It was like riding a tiger not knowing how to get off without being eaten The allusion to a tiger in this sentence reminds us of last year s Booker prize winning novel The White Tiger by Aravind Adiga a fellow Indian writer Through his novel as well as author interviews Adiga postulates that only through two ways can a poor man rise above his rank in India s current socio economic system crime and politics After his father migrated to the state capital Hyderabad from his ancestral village Garagaparru he started buying land

in the city Raju was sent to Ohio in the US to study business He came back to help his father in the construction business Raju grew the business achieved great success finally diversifying into textiles and even software now he was firmly saddled on the tiger Tax holidays and India s outsourcing boom helped Satyam that was started with 20 employees in 1987 to become India s fourth largest outsourcer But Raju was not happy with the number four status He wanted to be number one And that desire to become the numero uno in his field by hook or by crook caused his ultimate downfall Raju s revelation shocked not only investors employees and clients of Satyam but also corporate India as a whole The repercussions of the fraud were felt not only by the Indian IT industry but also by overseas investors who had invested heavily in the American Depository Receipts ADRs issues of major Indian IT companies including Satyam

Getting off the tiger Now in police custody Raju is no fool Despite what he says he surely knew how to get off the tiger and save his life He had already done what he had to do siphoning off millions of dollars into scores of secret accounts As per The Outlook the suspicion from day one has been that Raju probably owned up to inflating accounts as the punishment for this is significantly less than that for siphoning funds The report claims that perhaps it was the sub prime crisis and its indirect impact on the Indian real estate market that forced Raju to get off the tiger Raju must have been rotating funds from Satyam to his construction firm Maytas hoping that he would plow them back after he had earned the profits from the real estate boom When the boom turned into a bust the game was over for Raju Rotation of funds refers to the practice of illegally moving funds from say Business A and investing it in Business B Once the investment in Business B turns profitable the original money is quietly put back in Business A The Outlook Clannish feudal and also dynastic As many reports and investigations into his past reveal Raju wanted immense success and respect With Satyam s success Ramalinga Raju started taking his status as an icon seriously but was very unhappy that he wasn t spoken of in the same breath as Narayana Murthy of Infosys and Azim Premji of Wipro writes Sugata Srinivasaraju in Andhra s Very Own in The Outlook He also made a serious effort to intellectually elevate himself to the level of the bigboys of the IT industry However seemingly modern and multinational Satyam became since the 1990s some primitive qualities never left him and his company They say he was somewhat clannish feudal and also dynastic Qualities that one usually identifies with agrarian Andhra Pradesh They point out that he was an inveterate gambler of sorts with a deep sense of destiny They also describe him as an aimless entrepreneur who dabbled in different disparate ventures before he chanced upon fame through the IT industry in the 1990s Since there was no central vision to his entrepreneurial journey they believe Ramalinga Raju mixed his old economy license raj habits with the spirit of the new to create a heady cocktail that ultimately brought him down His work of charity through the By Raju Foundation in his ancestral village can perhaps also be seen in the same light

feeding his primitive ideas of clannish clout and dynastic rule most residents of Garagaparru and other coastal villages in the Bhimavaram block about 400 km southeast of Hyderabad do not understand Raju s crime Nor do they want to We re supporting him because he s a nice man said Prasad Raju a 26 year old electrician who works in Hyderabad and was in his native village for Sankranti He has done a lot for us Because of him we now have safe drinking water We don t have walk to Bhimavaram for medicines Ambulances are a call away

A white tiger Is Raju then a white tiger a rare creature in a shining new corporate India which is otherwise pristine full of honest business leaders unadulterated with the wheelers dealers and fixers of the license raj era Pathetic levels of probity in public life absence of an ounce of corporate transparency and widespread bureaucratic malfeasance are components of much that is Indian society today Yet to point out that we are today largely venal verges on the unpatriotic and is sacrilegious But just last year India was ranked a lowly 74 among 180 countries of the world on the worldwide Corruption Perceptions Index Enough said There is definitely a huge lack of ethical character in today s business leaders Character was a moral asset that combined honesty and loyalty to a fellow citizen or comrade soldieIt is a reflection of contemporary morality that we have changed the meaning of the word Today a character is either a chap with a tic in his metabolism or a role in fiction film or television From a truth character has changed to artifice Money can do strange things as we saw in Ramalinga Raju s case The future of 50000 Satyamites alongwith another few millions of investors is in jeopardy largely due to him and his top management and this is due to his callous attitude to cheat the very company he created It is suspected that his dealings with another company he promoted Maytas Properties and infrastructure and a subsequent plan to acquire Maytas infrastructure for 1 6 billion that was strongly rejected by Satyam shareholders and the investor community alike is largely responsible for all this fracas and misdeeds of colossal magnitude The love for land is an old greed of mankind but one needs to know where to draw the line between ethical business practice and greed when it comes to this Unfortunately Raju has proven that even CEO s and Chairman of top blue chip corporates are not immune People liken the Satyam controversy to the Enron controversy because it is quite similar A Chairman being in the know cooks the books a CEO is party to this crime and a CFO turns a blind eye to this The auditors shred all accounting documents of this It is sad to say a founder can back stab his own company What was he thinking Forget corporate governance he lacked basic integrity ethics and values And after all how much money does one need He was easily one of the most respected person s in the Indian IT service industry before all this happened so could he not have been content with that That should have been creation of company 101 India s image as a global outsourcing hub was also badly affected The international media was taken aback by Raju s shocking revelation Commenting on Raju Forbes in its January 2009 issue wrote It was a horrifying turn for a man long considered one of India s self made success stories and active philanthropists

SURVEY DATA ANALYSIS INTERPRETATION As a sub part of our research a survey was conducted among employees of various organizations to know what their perception of ethical leadership is and how much relevance it holds in their lives Based on which the following interpretations and observations were made

1 What are the characteristics of an ethical leader
The respondents are equally divided when it comes to finding out the characteristics of an ethical leader Equal numbers of respondents believe that a leader should assist followers in becoming self sufficient by encouraging and empowering them should respects the rights and dignity of others Some people also believe that assist followers in becoming self sufficient by encouraging and empowering them peopleoriented and also aware of how their decisions impact other Finally a small of respondents also think that a leader serves the greater good instead of self serving interests

2 An ethical leader must always respects the rights and integrity of others
More than 60 people think that a leader should have respect for integrity of the employees This is simply a great win win The more a leader helps people take additional responsibility the more they are motivated and challenged and the more they can accomplish If a leader believes this he will strive to treat each person with as much respect as you show to the big wigs at the top of the organizational food chain He will take time to listen to your employees concerns and ask about their families Give them the same attention as your customers with big checkbooks Care about their success and they will take care to help you with yours This brings us to another question Should leaders apologize to others in case they commit a mistake Majority again thinks yes successful apology can turn enmity into personal and organizational triumph whereas an apology that s too little too late or too transparently tactical can open the floodgates to individual and institutional ruin The apology is likely to serve an important purpose the offense is of serious consequence it s appropriate that the leader assume responsibility for the offense the leader is the only one who can get the job done and the cost of saying something is likely lower than the cost of staying silent The author draws her conclusions from hard data and abundant anecdotal evidence examining notoriously bad apologizers as well as exceptionally good ones While selectivity is the key good apologies usually do work

3 Whom do you consider the most ethical leader in today s times
Clearly Ratan Tata emerged as the favourite among the respondents courtesy the great thistory of ethical leadership instances and CSR initiatives TATA group has taken Narayan Murthy came a close second with the ethical working standards he has successfully maintained in his organization

4 Does competition destroy ethical behaviour
Traditionally in economics competition is believed to improve productive efficiency of firms and increase social welfare but some cases in the past and the most recent Satyam case puts a serious question mark on this school of thought We thought of asking people what they think about this and got the following results 57 said that they feel competition destroys ethical behaviour While 43 feels that competition cannot be blamed as the reason for people following unethical practices Looking at the great percentage of Yes results one can say that the general notion is that sometimes conduct described as unethical and blamed on greed is consequence of market competition The point is not to excuse or condemn any or all of these practices but merely to pinpoint the crucial role of competition as opposed to greed in their spread The cases which got highlighted in the past showed that firms in more competitive industries tend to hide more profits all else equal Also firms positioned unfavourably in competitive environments such as firms facing higher corporate tax rates firms facing more severe financing constraints smaller firms and private collective firms display stronger propensities to hide profits In a bid to beat competition many people take the path of engaging in unethical acts However for every Enron there is a Wal Mart a Microsoft and a GE For every Satyam there is a TATA a Reliance and a Infosys These companies also have been among the stalwarts of the Corporate League of their respective countries and are doing phenomenally well in this competitive world So blaming competition to unethical behaviour can be termed baseless It can be agreed upon that competition does lead to pressure to perform well and to put in one s best effort to show good results But at the end it all depends on the leader what way he she wants to choose to attain big results

5 Will you consider a company s ethical unethical practices while taking your decision to join it money
being the other factor We talk about ethical leaders ethical practices and condemn unethical behaviour very strongly But is it just confined to talks or we actually practice what we preach We asked the question to people to know whether they really consider ethics when it comes to taking personal decisions especially when there is a monetary consideration with it A good 64 people said that for them it matters if the company they are going to join is known for ethical practices and they would take their decision to work with it after analysing the company s work practices Especially after high

profile incidents like Satyam people especially the youth have learnt the importance of ethical practices in business The fact that at present names like Ratan Tata and Narayan Murthy are taken with great respect and on the other hand names like Ramalinga Raju are taken with extreme disgust clearly shows that what impression youth have in mind of the leaders who follow ethical unethical practices Gone are the days when money used to be the sole factor of choosing a job Now the youth are fully aware of the responsibility commitment and honesty which they owe to their work Apart from money and a good profile now the youth wants a good workplace with an ethical work culture They want to follow the footsteps of their role models like the ones mentioned above They don t just want a well paid job but the kind of work atmosphere which displays good conduct and ethical work practices so that they can earn not just awards and rewards for their work but also can earn respect and admiration from people in and outside their workplace for their good code of conduct and ethical work practices and hence can live with pride and dignity

6 Is avoiding his her own loss first when the company s future is at stake right on a leader s part
The owner of the company is considered to be the person who is expected to look after the rights and interests of the various shareholders and stakeholders for the company be it the employees the shareholders the creditors the suppliers the customers etc Should a leader prefer his gain over company s loss and separate himself from the crisis the company faces or should he consider company s loss as his loss We asked people what they feel about this and the results were 71 people said that it is not right on the part of a leader if he works to avoid his loss first when can foresee that the company itself is going to be in a crisis 18 people didn t agree and the rest said they can t give an answer hypothetically Clearly majority among the people think that it should be against the ethics of a leader to look at his gain loss over company s status The leader does have the right to look for his her welfare but not at the cost of the company A leader s job is not only to drive a company towards the path of success and profits but also to equally support the company in darker times A leader should be with the company in the time of crisis to work towards to take it back to the success track as it is not just the company s future but the future of millions of shareholders employees lenders and other stakeholders which is in his her hands A wrong move or any selfish act to only work towards one s personal interest can ruin the lives of many So a leader should always act responsibly keeping in mind the number of people he is accountable to and all those lives which are directly related to the well being of the company

CONCLUSION Business ethics are moral values and principles that determine our conduct in the business world It refers to the commercial activities either with other business houses or with a single customer They can be applied to all aspects of business from generation of an idea to its sale Business use the society for its resources and functioning thereby obligating it to the welfare of the society While the objective of all business is to make profits it should contribute to the interest of the society by ensuring fair practices However greed has led the present business scenario towards unethical business practices legal complications and general mistrust Many organizations now implement the code of ethics in their company polices which they implement during induction and regular training In order to build a honest reputation and ensure smooth running of an organization the company leaders should ensure provision of fair opportunities in promotions and training good working conditions and timely payment of salaries For companies into manufacturing complete information of the service and product should be made available Personal information of the customers should not be used for personal gain Unscrupulous tactics and methods should be avoided while handling competitors Rules and regulations regarding taxes duties restrictive and monopolistic trade practices and unlawful activities like corruption and bribing should be adhered to There should be transparency in the organization over the business decisions made Business houses that comply with ethics to determine their conduct are shrinking in number The lack of business ethics in the market is the reason the world economy is presently in crisis Organizations now recognize the positive effects and outcomes of being ethical humane and considerate They have a competitive edge in the market because of the honesty they show in their services Their morally upright reputation attracts better staff and helps in retention Though ethics are legally binding in most cases self monitoring transparency and accountability will go a long way in establishing trust of the people Besides this it makes sense to change before you are penalized

REFERENCES

1 http wikipedia org 2 www businessethics org 3 www imdb com 4 www ethicalcorp com 5 www workforce com