“Character is not homogeneous, like a quart of milk. It is sectional, like a grapefruit. Everyone has good sections and bad. One person may be strongly loyal to the boss, for example, but irresponsible in the job. Another person may be loyal and responsible until he gets a chance to enhance his ego. Ego will weaken character as much as anything I know. Willie Sutton, the bank robber, loved his work but cried when he had to lie to his mother about where he had been. You can’t say he had a totally bad character; you can only say some sections were bad. As a manager you must evaluate all the sections, build on the good ones, and avoid the weak ones”
– Fred Smith Sr (1915-2007)
As we leave 2012 behind, we can recall several issues in which an action does not seem right to many but which the law has so far not held to be wrong. For example, a person holding public office but stands accused of a criminal act, or whose organisation has indulged in significant unethical practices. In India, the matter is further complicated by the perception that autonomous public institutions may be manipulated to serve political ends.
In public discourse and editorial commentary, we often debate the ethical versus the legal aspects of any issue. The former is influenced by social mores and standards, while the latter is the subject of legal process. Ideally, they should support each other but, quite often, they do not. This is a long-standing tension that allows suspect, and even guilty, individuals to continue to do whatever they are doing.
In his scintillating book Macaulay, historian Zareer Masani recalls how the court system was used by the British to delay justice in litigation with Indian merchants in the 1800s. The East India Company had a high court called Sadar Dewani Adalat, to judge commercial disputes. The Indians had to use this court compulsorily. However, a British litigant could take his or her case directly to a Crown-appointed Supreme Court in Calcutta — a route unavailable to the natives. Macaulay was appalled by the racial discrimination, particularly because the Indian litigant could be faced with an expensive and prolonged litigation at the Supreme Court. Macaulay argued that “the reputation of the Supreme Court was so dreadful that the mere threat of appealing to it was used by British debtors to intimidate Indian claimants”.
An incident occurred half a century ago when the Indian business community faced such a moral hazard. In 1962-63, the Vivian Bose Enquiry Commission, appointed by the Nehru government, submitted its report on financial irregularities and stock market manipulations. After the T T Krishnamachari-Haridas Mundhra scam of the late 1950s, the private sector image was low. The case was unravelled when Ramkrishna Dalmia, the then chairman of Dalmia Jain Airways and the owner of Bharat Insurance Company, admitted in a written confession – a bit like Satyam chief Ramalinga Raju – that he had embezzled funds (Rs 2.2 crore) from his insurance company. Dalmia faced trial and was jailed for two years. Shriyans Prasad Jain, an owner and director of the Dalmia Jain companies, had been elected the Federation of Indian Chambers of Commerce and Industry (Ficci) chairman in the same year. A debate arose over whether Jain should step down from the Ficci presidency or not.
Discrete meetings were held among members to discuss whether Jain should cease to be an office-bearer of Ficci until he had cleared himself of the charges made in the Vivian Bose Enquiry Report. Some members felt that such a hasty and extreme decision would damage the prestige of Ficci. Others differed (for example, Mafatlal and Tata) and expressed their view that Jain should resign voluntarily. If he did not do so, then Ficci should have asked him to resign. They pointed out that “at all times, and particularly at the present time when the private sector is under attack from more than one quarter, the conduct of the representative bodies and the chosen office-bearers, should be above reproach.”
The divergence of views continued; Tata companies resigned from Ficci on March 5, 1963 and their resignation was accepted on April 9, 1963. Mafatlal followed suit. Until the business group was reorganised 20 years later, no Mafatlal company returned to Ficci.
While recalling this incident, one should take care not to judge the individual. Jain was a respected and prominent member of his community. Even before the controversy, in 1952-58, he had been a member of the Rajya Sabha. He was a philanthropist; he endowed the S P Jain Institute of Management and Research, a prominent contemporary institution. In 1988, the government decorated him with the Padma Bhushan.
The incident needs to be viewed on its own merits and within the context of those times. At a time when private sector scams bothered the public consciousness, did the head of an institution have to be, like Caesar’s wife, beyond reproach? Or, was it all right if his company had been indicted in a formal commission of enquiry report? As late as in 2012, Chief Justice Kapadia struck down the appointment of the Chief Vigilance Commissioner on the ground of maintaining “institutional integrity”.
I recall another incident from the 1970s involving moral hazard. At that time, live-in relationships were not accepted anywhere, and certainly not in India. An international corporation had seconded an expatriate director to its Indian subsidiary. The expatriate stayed at a hotel before moving into his flat, but with a woman who was not his wife. This subsidiary had recently sacked a long-serving, senior Indian executive for charging expenses of his official travel while accompanied by a woman who was not his wife. The Indian CEO of that company felt that an expatriate should not be treated differently. He summarily instructed the expatriate director and his lady to take the next plane out of India. That was in the 1970s.
Thirty years later, the global CEO of the same global company visited the Indian subsidiary with his partner, and the Indian subsidiary paid all the hotel bills without any questions. The act was the same but the context in which the act was viewed had changed.
In the final analysis, it comes down to introspection on whether an ethical value should prevail or whether one should wait for a “final” legal view, which, regrettably, sometimes never arrives. All our institutions, public and private, would gain from such introspection.
The writer is a director of Tata Sons. These views are personal