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Code of conduct: Why Indian companies need ethics officers

In law a man is guilty when he violates the rights of others. In ethics he is guilty if he only thinks of doing so" Immanuel Kant, German philosopher Technology giants Apple and Google have often had questions raised about the ethicality of their business practices. The former for not doing enough to improve workers' conditions at its suppliers' manufacturing units in China, and the latter for using its position as the dominant search engine to thwart competition. So it did not come as much of a surprise to many when the two were recently in the news for avoiding paying taxes in the US on billions of dollars of profits by creating subsidiaries in countries like Ireland. Apple chief executive Tim Cook has called for reforms in the tax system and said Apple pays every single dollar it owes. Legal vs Ethical It may turn out that Apple and Google did nothing illegal but just took advantage of the loopholes in different countries' tax structures. This issue fits into the debate of "legal vs ethical", according to W Michael Hoffman, executive director of the Centre for Business Ethics at Bentley University in the US, adding that matters like this are to be addressed by a company's ethics committee or chief ethics officer. "If a particular thing is not prevented by law, you need to think whether it will set a bad precedent or what would happen if it was reported by the media," he says. Another such example is a chemical company discharging effluents without treating them when the law doesn't prevent it. Legally, the company may be fine but is failing in its responsibility toward the environment, says Hoffman. Among the prominent global companies which have chief ethics officers are construction and engineering company Bechtel Corporation, Prudential Financial and retailer Best Buy. If the tax episode rekindled the ethics debate globally, Ranbaxy Laboratories' $500-million settlement for charges related to drug safety and falsifying data has done the same in India. Experts believe such instances only highlight the need for companies to give more than cursory attention to ensuring propriety in the workplace. Ethics officers are still a rarity among companies in India. Though every large company has a detailed code of conduct, it seldom resonates beyond the paper it is on. "The code of conduct is taken very seriously in the US. Companies, for instance, are very particular about diversity and inclusion," says Achal Khanna, CEO, Society for Human Resource Management (SHRM) India. Some Tata group companies like Tata Sons, Tata Steel and Tata Teleservices are among the few which have ethics officers in India. For instance Tata Sons, the main holding company of the group, in February appointed Mukund Rajan as chief spokesperson, brand custodian and chief ethics officer for the group. "Given the intrinsic linkage of the [Tata] brand with the value system which determines the group's high standards of ethical conduct, the brand custodian has been entrusted with the role of the chief ethics officer of Tata Sons," says a statement from the company's external communications agency Rediffusion, in response to ET Magazine's queries.

Ethics of Minutiae While in countries like the US, chief compliance officers' role has been expanded to include matters of ethics, in India they are still largely concerned with legal matters. In some cases, the company secretary is also the chief compliance officer. But experts say there is certainly a need for ethics officers. Khanna points to minor infractions which need to be monitored. "I came across an instance where the complimentary food in a company was so good that employees were getting it packed for home. There was another instance of a senior official in a company taking office stationery for his kids," Khanna says. Dheeraj Sharma, who teaches marketing and organisational behaviour at IIM, Ahmedabad, says that though business ethics are largely universal, cross-cultural differences result in a lack of universal understanding of ethics. "Thus, in India we don't understand what is legal may not necessarily be ethical. That's why companies need ethics officers," he adds. Tackling Complexities The task gets more difficult if a company has operations in multiple countries. Wind turbine maker Suzlon, which has operations in 33 countries, till two years ago used to have regional ethics officers who reported to a global ethics officer. But now it has two central ethics committees, one for India and the other for all international regions. These committees have personnel for human resources, finance and other key departments. "The reporting system run by a third party, and completely independent of the company allows an individual within or outside the company to report any concerns with absolute assurance of confidentiality," says a company spokesperson. There are also companies like Wipro and Vedanta which have chief sustainability officers who look at initiatives related to the environment and corporate social responsibility. State-owned companies have chief vigilance officers who oversee tenders and compliance. But, according to Khanna, the role of ethics officers is much wider and hence there is need for companies to have them. In companies like Tata Teleservices and Tata Steel, the managing director is also the chief ethics officer. Tata Tele, which was given a clean chit by the Central Bureau of Investigation in the 2G spectrum scam in June 2011, appointed Rakesh Sharma as chief ethics counsellor a few months later. Questions sent to Tata Steel and Tata Tele were unanswered at the time of going to print. Sharma believes it is preferable for a company to not have the CEO as the chief ethics officer because the CEO himself could be under scrutiny at times. "A chief ethics officer is similar to an auditor who ensures that certain lines are not crossed," says Sharma.

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