Mr. Suhayl Abidi, Research Advisor, GOG-AMA Centre of International Trade & Consultant, Amity University
In February of this year, the partners of McKinsey & Co., world’s largest and one of the most respected consultancy organisations, voted to replace Kevin Sneader as global managing partner in a historic rebuke over his handling of a string of crises. The most important was the firm’s ethically and morally questionable advice to its clients, a number of pharmaceutical firms selling opioid drugs in how to increase opioid sales, and how to counter the emotional messages from mothers with teenagers that overdosed on the drug. McKinsey & Co. agreed to pay $574m in an out-of-court settlement of lawsuits brought by 49 US states over its advice to opioid manufacturers accused of fuelling an epidemic of prescription drug addiction. Over 40,000 Americans have died due to opioid overdose in the past two decades. This advice led to the bankruptcy of a McKinsey client, the largest firm selling opioid drugs.
In their zeal to increase business, many business leaders cross the blurred lines between what is proper and what is not. In the present time of powerful social media and 24/7 scrutiny, any action seen as unethical can rebound on the company. Though integrity and values have always been important in business, today it has assumed paramount importance for the CEO and Board of Directors. Recently, we have seen in the cases ranging from Yes Bank, ICICI Bank where the business leaders crossed the line of ethical business practices.
Businesses have a bond with its stakeholders such as customers, employees, shareholders and the society in which the company functions and the foundation of this bond is trust. It is the responsibility of the Board of Directors to oversee this function, especially keep a sharp eye on the CEOs and other senior leaders that they don’t cross the line of ethical behavior. This is very common in marketing where customers are given misleading information to increase sales. Very recently, Honey marketed by prominent brands failed a key test of purity, the Centre for Science and Environment (CSE) has claimed, citing an investigation it conducted on various brands of Indian honey. Out of 13 samples of the top brands of honey in the market, only three brands passed a key test. The others, which the biggest names in Indian honey. CSE said that “It shows how the business of adulteration has evolved so that it can pass the stipulated tests in India. We found that sugar syrups are so designed that they can go undetected.”
If ethics is disappearing from our society, and business is part of it, we have only to blame our educational system. Ethics is the most essential and functioning branch of philosophy in today’s world. Ethics are an important part of the decision- making but students are not taught to think ethically. I am surprised to find that Harshad Mehta who conducted bank and stock frauds in the 90s to gain wealth is not seen as a crook by many in the younger generation but someone who was smart enough to break the system. Education is fundamentally about learning values, but we have a great deal of difficulty talking about values and it shows in our political, economic and business systems.
Howard Gardner, the famous Harvard educationist talks about the “Five Minds”, competencies which are required in the 21st century. The fifth mind is “The Ethical Mind”. A U.S. poll revealed that 72 % of respondents believed wrongdoing was widespread in industry. Only 2 % felt that leaders of large firms were “very trustworthy”. According to Professor Gardner, an ethical mind broadens respect for others into something more abstract. A person with an ethical mind asks herself, “What kind of a person, worker, and citizen do I want to be? I fall workers in my profession adopted the mind-set I have, or if everyone did what I do, what would the world be like?”
The downfall of Ranbaxy Laboratories Limited, at one time the largest drug company in India, was due to the unethical behavior of the top leadership in condoning widespread fraud in submitting data and samples to the US drug authorities to obtain approval for their drugs. This was unearthed by a whistleblower who first tried to caution the company leadership and lost his job as a result. He later took his evidence to the US Federal Drug Agency which fined the company $500 million, the largest awarded till date.
Whistleblowers display ethical minds. Many people might see a top manager doing something unethical, but they won’t do anything about it because they want to keep their jobs. It was a whistleblower who brought the corrupt practices of ICICI Bank Managing Director Chanda Kochar to the attention of the bank’s board of directors which dismissed it at first. Later, he revealed it in public leading to her arrest and prosecution is presently continuing.
In the present digital environment, with widespread use of social media, such behavior can even bring a company down and the management of companies must always keep in mind when conducting business that their paramount duty is upholding the trust of its stakeholders.