Date:22/08/2004 URL: http://www.thehindubusinessline.com/2004/08/22/stories/2004082200941600.htm

Back Business ethics can enhance bottom lines

Preeti Mehra

New Delhi , Aug. 21

FOR KPMG's Dipankar Gupta, the academic-cum-consultant who virtually founded the consultancy's Business Ethics and Integrity division, corporate ethics does not mean standing on a pulpit, sermonising and taking the high moral ground.

He believes that corporate ethics could have a substantial impact on the bottom line of a company and his latest book Ethics Incorporated: Top Priority and Bottom Line, states just that.

"When we began our assignments in KPMG, we did not have a clearly formulated idea of how to put business ethics to work other than a set of guidelines in which we firmly believed. We were convinced that if business ethics were to advance then it must be able to articulate itself in practice and show empirically verifiable deliverables. To that extent we had to clarify what we meant by ethics, and why ethics is not just about being good and moral," writes Gupta.

He argues that there is no off-the-shelf module for corporate ethics and that the best practice would be to try and integrate the company's norms with its business policies and code of conduct. He believes that it would be wise for companies to emphasise the don'ts instead of stress on the do's and if rules such as these are demonstrated by the company's leadership, it would be all the more acceptable to employees and positively impact attrition rates.

But Gupta does not stop here. He makes a case for the inextricable link between corporate governance and business ethics and how sans business ethics, corporate governance would "run the very risk of becoming a bloodless and ghostly apparition, far removed from its original condition of robust well-being." He also points out how it is possible for a less ethical company to reduce corporate governance to a mere paper exercise and outlines what is incorporated in corporate governance today and what it actually should be.

For instance, the need for an external chairman in the board of directors is quantified, however what is left ambiguous is the definition of the `outsider.' Can the friend of a promoter or an earlier business associate be an outsider? he asks as he reels out several other such grey areas in his book.

Though Gupta finds companies much more geared towards business ethics now than in the past, he feels the reason why ethics have not taken centrestage is because, unlike in the West, in India there is not enough pressure on companies to comply with shareholder wishes. "Shareholders and stakeholders are still afraid to question authority, are not demanding enough and have yet to shake off the hierarchical yoke," he says.

But the fact that investors do not rock the boat does not mean that bottom lines can take the same indifference. Business ethics, reputation, norms and low employee turnover are all the impact of better business ethics and also have a substantial influence on the bottom line.