|How can the private sector best serve the unmet needs of
India’s people in a sustainable way?
|Ethics of Indian Business:
| In the global marketplace, the evolution of power is constant and inevitable.
The control and influence of people and resources now takes the form of
GDP, currency exchanges and trade deficits. Modern societies develop
based on the thought that the open market equalizes and creates justice in
our economies. Human desire for power has morphed into a competitive
arena of multinational companies, attempting to conquer and survive. Wars
no longer have battlegrounds, but exist among systemic competitiveness
within the business environment. This competitiveness, the institutions,
policies, and factors that determine the level of productivity and market
capitalization, sits at the core of prosperity for a society. These sectors
affect the growth and sustainability of a nation. Organizations must look
beyond macroeconomic data and drill to the core of strategic market
drivers. Continuous evolution within the business environment determines
the livelihood of a nation’s citizens.
Developing nations face different intrinsic pressures than the developed
world. Many emerging markets are economical growth centers with a
large population and resource bases. Secondly, many of these markets are
generally undergoing economic and political reforms. As quickly growing
economies, emerging markets not only contribute to the world economy
but are also rising participants in the world’s political and social affairs.
Faced with the buckling pressure of growing populations, these economies
struggle to align public sector interests with private sector marketplaces.
Creating a system that exponentially reduces poverty has proved
challenging to emerging market public sectors.
India, more so than any other emerging nation, strongly exhibits all of
these characteristics. GDP growth in India has averaged 6.1 percent over the
last decade and 9.4 percent between 2006 and 2007. The real GDP growth
averaged 8.6 percent since 2003 and is expected to grow by an average of 9
percent a year through 2012.1 As a nation, India is rapidly armoring. Private
sector enterprises have successfully identified opportunities on the local
and global marketplace. Over the past five years healthcare has seen 20
percent growth a year, due mostly to India’s growing population, but also
the advancing quality of life that distills from per capita income increases.
Over the past 15 years, Indian companies have established hubs of global
services in information technology; this sector contributed 90 percent to
Indian GDP growth in 2009. TATA recently began selling a four-passenger
car for the equivalent of US$ 2,050, making an economically viable vehicle
for India’s growing middle class. General Electric, Microsoft, Oracle and
Cisco have all established large research facilities through India during the
last three years, taking advantage of the nation’s educational prowess.
The sun certainly shines upon India, but the path to long-term success
lacks definition. India’s competitiveness as measured by the World
Economic Forum ranked 48th in 2008 and slipped to 51st in 2010.2 Though
a broad-spectrum measurement, the indication speaks volumes. It is
through the competitiveness of a nation that businesses add value to
economies, changing income levels and the quality of life for its people.
Creating a competitive business environment is key to meeting the unmet
needs of India’s people by strengthening companies, enabling the middle
class to expand. As in other emerging markets, India’s public sector size
in comparison to the growing population has created a gap that cannot
possibly close without the cooperation of the private sector.
The World Economic Forum reports that inadequate supply of
infrastructure, corruption, inefficient government bureaucracies, restrictive
labor regulations and access to financing are the top five most problematic
factors for doing business in India. Of these five factors, corruption is
most within reach of the private sector. Vague government policies and lax
enforcement create uncompetitive corporate governance systems that are
not prepared to deal with globally sophisticated companies.
Indian power dynamics in business emphasize paternalistic
management structures as opposed to participatory systems. The Western
concept of conflict of interest does not always mesh well with the Indian
value of loyalty. Friendships factor into business interactions; these
relationships can go as far back as elementary school. Gift giving and
reciprocity are natural aspects of the Indian culture that extend from the
family into the business environment. Complicated social order often
creates an ambivalent concept of ethical behavior.
This ethical infrastructure perpetuates not only the divide between the
rich and poor, but also creates companies that are not equipped to expand
and compete within the global marketplace. Many Indian companies face
enormous pressure to grow in the challenging global economy. In such
an environment, Indian enterprises that want to win on the international
arena need to have solid ethical governance policies and procedures in
place since global customers and partners understand the implications
of associating with companies that lack functioning systems designed
to protect and promote stakeholder interests. Companies that do not
seek to maximize the stakeholder value chain, from populous masses to
shareholders and leadership, will find a lack of competitiveness in the evergrowing
dichotomy between the emerging and developed world. Without
change at the organizational level, the global competitiveness of India will
not be able to sustain continued growth.
Globalizing Indian companies have two options. One is to remain
local and reactive, waiting for the tightening of regulations and societal
norms, thereby remaining uncompetitive and contributing nil to the
people’s quality of life. On the contrary, companies can proactively
champion an advanced era of business ethics by creating a localized
standard worthy of carrying across borders. Strategic ethical optimization
is the most sustainable competitive driver an organization can add to its
arsenal. Creating an ethical framework for Indian businesses to maximize
competitive strength in the multinational marketplace establishes
the foundation for the private sector to improve the lives of a growing
population by closing the economic divide.
Designing a model to evolve Indian competitiveness requires a delicate
acknowledgement of the current business environment along with a
positive approach to future development. Businesses must connect the
fibers between profit maximization, stakeholder optimization and locally
ethical competitiveness in order to create sustainable growth.
1. Realign business priorities with corporate stakeholder responsibility.
- Profit maximization, market leverage and global competitiveness
must take an equal precedence with ethical behavior and corporate
governance. Corporate stakeholder responsibility is the obligation
of decision makers to protect and improve the welfare of societal
stakeholders along with the interests of the company.
2. Define a value added role for all stakeholders, local and global.
- Companies must analyze stakeholder priorities to develop a strategy
for strengthening competitiveness. Understanding the potential of
an organization starts with creating interdependency on economic,
environmental and societal levels. Businesses must develop a social
contract in order to create longevity in the marketplace; those
companies that do not have a system to use power wisely often lose
it at some point in time.
3. Formulate bold, long-term targets and create processes that drive
ethical decision making and stakeholder maximization.
- Setting short-term and long-term targets for ethical compliance
is important because it creates standards that make a company
more competitive on the global marketplace. Constantly adjusting
these standards will enable a business to enter new markets and
improve image as the Indian businesses approach multinational
status. Leadership must work with all internal groups to develop
an understanding of the factors affecting the organizations’ moral
climate: behaviors of superiors, ethical practices of the industry,
behavior of peers, formal organizational policy and individual
4. Establish credibility through a refined and enforced code of ethics.
- Ethical behavior enhances the image of an organization. Written
standards of conduct, training, methods of reporting and disciplinary
repercussions lead to long-term and sustainable business practices.
Creating a code that defines proper decision making will give
all stakeholders a model that is, at best, a path for success and
competitiveness, while also shifting power dynamics within an
organization. While competitiveness is the responsibility of all
stakeholders, ethical behavior starts at the top because enforcement
begins and ends there.
5. Exploit ethical differentiation and attack the global market with the
leverage of local strengths.
- Seeking ethical interdependency, sustainable operational excellence
and market leadership creates disruption within established arenas.
Leaders should begin by developing the strengths of an organization
to gain competitiveness. Organizations need to use local leverage,
capabilities and assets of India in order to succeed in the global
marketplace. Using a stakeholder value chain allows innovation
to begin locally; market growth leads to global demand and
This framework creates an interactive relationship among global
competitiveness, financial performance, corporate citizenship and image
that is stronger than simply aiming to maximize shareholder value. The
goal is to create long-term stakeholder value by taking advantage of
opportunities and managing risks related to economic, environmental
and social developments. Success for all enlightened organizations today
includes, among other factors, the ability to build a brand that inspires and
breeds trust. Though ethical changes can be difficult to create and instill
in an organization, leaders must be cognizant of sustaining a constantly
“enhanced” image in the global marketplace. Not only must the company
have a strong ethical foundation—that foundation must also be evident.
Having ethics codes and policies and implementing them tells customers,
vendors, partners, investors and other stakeholders what to expect when
interacting and entering into a relationship with the company.
Innovative ethical infrastructure will enable Indian businesses to
establish higher levels of global marketplace sophistication. The fusion of
business ethics, shifting stakeholder ethics, the rise of corporate governance
and compassionate capitalism will reshape the business landscape in India.
Corporations are created by the society, not to merely make a profit from
it. The DNA of an organization is more important than its profit margin;
creating a company that will last hundreds of years will help far more
people than a company that only looks at short-term gains. Recreating
corporate DNA with a responsible framework allows Indian businesses to
maximize competitive strength in the multinational marketplace. Ethical
evolution within the business environment creates a sustainable livelihood
for India’s citizens by empowering companies to expand into the global
marketplace, establishing the foundation for the private sector to tighten
the economic divide with job creation and enhanced quality of life.
1 “The Global Competitiveness Report 2010-2011.” Klaus Schwab. World Economic Forum. 2010.
2 “The Global Competitiveness Report 2010-2011.” Klaus Schwab. World Economic Forum. 2010.