January 03, 2009

Company Culture - By Sanjay Anandaram

The recent case of Satyam Computers trying to use its cash reserves to acquire the two infrastructure companies held by the promoter’s sons is certainly news worthy. Not because it was an unusual – far from it, especially in India! – but because it was withdrawn thanks to angry protests by shareholders. Corporate governance, ethics and reputation were the casualties in this case.

A friend of mine was till recently a senior executive in a family owned financial services company. He worked long hours, was extremely diligent, cost conscious and highly conscientious. One day, he decided to leave the company in pursuit of better prospects. The chairman of the company tried to talk my friend out of the decision. He was told how well he was doing, how highly he was thought of by all and was offered additional responsibilities. My friend took some time to think through the decision. After 2 weeks, his decision remaining unchanged, he informed the chairman of his desire to leave. Then, things erupted! The chairman started yelling at his senior executive and even threatened to run him off the financial services industry “I’ll see that you don’t find a job in the industry” while throwing in a few colourful epithets.

A senior professional executive was recently brought into a young family owned and managed company. The CEO’s wife routinely assigned “work” to an employee who reported into this executive without the executive being aware of the situation. The executive was naturally very upset.

A few employees recently quit a startup to start off on their own. They promptly joined a competitor and quite brazenly used their log-ins to access the information in their previous company.

I’m sure all of us have many more similar stories to share. The above examples throw up critical questions of culture, ethics and governance. They reflect how we behave, how we react to situations and are a mirror to the larger issue of flexible ethics in our country.

In the first instance, the chairman took the departure of the executive rather personally, as if his departure were an affront to him. His feudal hierarchical mindset could not stomach the idea of someone lower down the pecking order rejecting his overtures. His outburst against the executive is understandable but inexcusable. There was no effort made to understand the reasons for the executive’s departure, his sense of being neglected and ignored. Throwing money at a problem isn’t a substitute for treating people with respect and regard.

In the second case, the lack of governance systems in the company is shockingly glaring. What business does the CEO’s wife have ordering employees around? Her rights as a shareholder do not give her the rights to interfere with management of a company. Again, a combination of ignorance and a feudal attitude (viz. I’m the CEO’s wife) cause enormous grief to competent professional executives. The role and responsibilities of shareholders and management need to be clearly understood.

In the third case, dishonest and unethical employees tried to take advantage of their previous employer – not an unheard of situation! The company did not, obviously, have adequate safeguards to protect its interests. The employment contracts had to be reworked to include a non-compete clause, protection of confidential information and a non-disclosure agreement. The internal systems had to be re-jigged to have passwords of departing employees immediately disabled and so on.

But there’s a larger issue at stake here. One that involves company culture and ethics. Do the CEO and the rest of the leadership team walk the talk? How often does the CEO communicate the company’s vision and culture to all employees - Is there a written document that captures this? Do all employees understand what this means? Is the culture and code of conduct applicable to all employees or to just some employees? What parts of a company culture are negotiable and what aren’t? What happens to a senior executive guilty of violating the code of conduct vis-à-vis a junior employee? Do customers and vendors also fall under the purview of the code of conduct? If not, how is this communicated to them? Is the company, especially a startup, willing to live with the consequences of acting against some of its star employees, major suppliers or major customers on grounds of their having questionable integrity? If there’s a grey area, how will the company react – will it give the benefit of doubt to the accused? Do family members understand that the company is not a personal zamindari or fiefdom to be lorded over and plundered?

At the end of the day, is each one of us willing to stand up for ethics, governance and integrity?

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.