I went to a Hyundai show room last week to look for a new car for my mother. The salesman asked me what car I drove, and I said I drive a Suzuki Baleno. Surprisingly, he said he also drove a Baleno and found the car to be very good. He added that another of his colleagues in the same showroom also drove a Suzuki Baleno.
One of the classic dilemmas in Business Ethics is whether it is ethical for a company's employee to use products of a competitor, and on the other hand can companies insist that employees avoid such behaviour. Fortunately, this is one of the more light-hearted BE dilemmas and quite interesting to delve in. Let us look at a few scenarios.
Can a Toyota salesperson be seen driving a Honda Civic? Can a Philips manager have a Sony Plasma TV in her drawing room? These are visible demonstrations, and hence one can argue that they are potentially more harmful to the brands that they work for. What then about usage that is less visible, like a P&G Marketing Manager using Colgate tooth paste in his bathroom, or a Mr Turner working for Microsoft having a personal email account id called turncoat@gmail.com? Or the mother of all offences - a Coke manager drinking Pepsi while watering her garden? Is visible consumption of competitor products a greater sin than less visible ones? There is of course a third dimension that seems acceptable - which is the use of a competitor product to check it out - like a Lufthansa sales executive flying BA to check out if his company is giving away too much legroom compared to the British airline.
And can companies prohibit or discourage employees from using competitor products?
There are no easy answers to these questions, and in my experience I have not seen any formal policies on these aspects. The accepted position seems that companies do not have a right to prevent employees from being customers of a competitor, as it would be seen as interfering with their fundamental rights. This sounds rather unfair on the companies, but is the expected stance from an ethical organisation.
Unfortunately, most discussions on BE focus on the responsibilities of the organisation towards its stakeholders, with limited discussion on the reverse. In my view, an employee should not be using a competitor's product if it is going to lead to a clear conflict of interest that in turn is likely to harm the company's reputation. Like the Hyundai salesman driving around in a Suzuki. And I also feel senior managers of a company should not be using competitor products as they are seen by the outside world to be representing what the company stands for. This may sound old-fashioned, but in the olden days these were unwritten rules that everyone followed.
Of course I would be less worried if a Pepsi shop floor worker drinks Coke while on vacation, or a Sony clerk buys a Samsung handycam as it is 30% cheaper. Having a lower-paying job has its advantages sometimes, and freedom of choice may be one of them!
Monday, September 28, 2009
Friday, September 25, 2009
Separating men from mercenaries
The ability to learn from mistakes and not to repeat them is perhaps the most important requirement of any good governance mechanism. Unfortunately, this is sorely neglected by corporates and regulators alike. How else can we explain the sub-prime fiasco, when we had Enron to learn from?
The root cause of both crises was the unbridled greed of top management, reflected by insanely high compensations. Today, a top corporate executive anywhere in the world earns several times what a good surgeon or teacher earns. In fact, what the Chief of the Indian Army earns in a year is probably less than what the CEO of any of the top 100 Indian companies earns in a month. Now to imagine that a CEO has greater responsibilities or IQ than the Chief of the Army is not unexpected of corporate egotism!
I agree that if corporates are self-funded they legally have the right to pay their CEOs whatever they like, even though the morality and social justice of this would be questionable. But at a time when the free market across the world is being pulled out of the ICU by the State using tax payer's money, the question to answer is whether enough is being done in the form of regulation to rein in top management wages. As rescuers, the State and the public have a right to insist on such regulation. Sadly we do not see enough focus on this, and my fear is that history will repeat itself.
Effective regulation over managerial remuneration should include aspects like fair distribution between short-term and long-term rewards, limits on the multiple between wages of the top management and the lower levels, and equity between corporate wages and remuneration in other comparable sectors of the society. I would like to see if any progressive corporates have the courage to come out with affirmative action on this. That would certainly separate the men from the mercenaries.
The root cause of both crises was the unbridled greed of top management, reflected by insanely high compensations. Today, a top corporate executive anywhere in the world earns several times what a good surgeon or teacher earns. In fact, what the Chief of the Indian Army earns in a year is probably less than what the CEO of any of the top 100 Indian companies earns in a month. Now to imagine that a CEO has greater responsibilities or IQ than the Chief of the Army is not unexpected of corporate egotism!
I agree that if corporates are self-funded they legally have the right to pay their CEOs whatever they like, even though the morality and social justice of this would be questionable. But at a time when the free market across the world is being pulled out of the ICU by the State using tax payer's money, the question to answer is whether enough is being done in the form of regulation to rein in top management wages. As rescuers, the State and the public have a right to insist on such regulation. Sadly we do not see enough focus on this, and my fear is that history will repeat itself.
Effective regulation over managerial remuneration should include aspects like fair distribution between short-term and long-term rewards, limits on the multiple between wages of the top management and the lower levels, and equity between corporate wages and remuneration in other comparable sectors of the society. I would like to see if any progressive corporates have the courage to come out with affirmative action on this. That would certainly separate the men from the mercenaries.
Monday, September 7, 2009
Corporate Reputation
Someone asked me the other day "How does a corporate build its reputation?". It was a seemingly simple question, as any number of books on the subject have a ready answer - build transparency, accountability and good governance - and your reputation shall grow. Let us step back for a moment and think, how many people in an organisation would know what the activity of building transparency, accountability and governance means or involves, and what their role in this activity is? Would the Purchasing Clerk or the Salesman empathise with it? Often times the problem with Business Ethics is that we place it on a very high pedestal and make it sound more complicated than it really is.
In simple terms, corporate reputation is built or otherwise every time there is an interaction between a stakeholder and the organisation. If each of these interactions is based on the principles of respect, fairness and mutual benefit, reputation grows. When a Salesman responds promptly to the complaint of a shop keeper in a small town, he is demonstrating respect. When the Purchase executive ensures that there is a transparent tendering process, he demonstrates fairness. When a Purchase manager shares the annual requirement with a vendor, he is emphasising on the principle of mutual benefit. These are simple principles for anyone in the organisation to relate to.
The key here is that every interaction counts. The net impact is something like a credit card account. When you spend on the card, you get reward points. These add up slowly over time. When you miss a payment, you get a big charge on your card. The penalty for delayed payments is much higher than the reward points for spending. Sometimes it takes a series of non-payments to get your card cancelled, but sometimes one large default may do the damage.
In simple terms, corporate reputation is built or otherwise every time there is an interaction between a stakeholder and the organisation. If each of these interactions is based on the principles of respect, fairness and mutual benefit, reputation grows. When a Salesman responds promptly to the complaint of a shop keeper in a small town, he is demonstrating respect. When the Purchase executive ensures that there is a transparent tendering process, he demonstrates fairness. When a Purchase manager shares the annual requirement with a vendor, he is emphasising on the principle of mutual benefit. These are simple principles for anyone in the organisation to relate to.
The key here is that every interaction counts. The net impact is something like a credit card account. When you spend on the card, you get reward points. These add up slowly over time. When you miss a payment, you get a big charge on your card. The penalty for delayed payments is much higher than the reward points for spending. Sometimes it takes a series of non-payments to get your card cancelled, but sometimes one large default may do the damage.
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