iGate’s Failures in Risk Management

iGate fired its CEO Phaneesh Murthy for sexual misconduct after Araceli Roiz; an American employee accused him of sexual harassment. As per media reports she has claimed that the relationship started soon after she joined the organization in 2010 and is pregnant with his child.

Mr Phaneesh Murthy has the dubious honor of facing two similar charges while working as a senior manager in Infosys in 2002. Reka Maximovitch and Jennifer Griffith had both received huge out of court settlements previously. Now he faces the similar charges from Araceli Roiz. Mr Murthy has acknowledged that he had sexual relationships with Ms Roiz. However, it was with her consent. He has alleged he is being defamed and this is an attempt at extortion.

With the limited information available in the media, one cannot comment on the details of the personal relationship.

However, this disaster teaches a few lessons. iGate could have prevented this reputation damage and legal risks if it would have taken a few timely steps.  iGate board and senior managers failed to take due care of the following risks.

1.     Pre-employment Background Screening

Mr Murthy has an excellent academic and professional achievement record. He was credited for taking Infosys turnover from $ 2 million to $ 700 million. However, when he was hired by iGate in 2003 he was in the news for all the wrong reasons. The sexual harassment cases were all over the media.

iGate needed a CEO who could deliver results. My guess is the board looked the other way or considered Mr Murthy’s infidelities small or insignificant. However, if a junior or middle manager had the same reputation, his career would have been over. No organization would have hired him.

Hence, when generally senior managers background screening is more stringent  than junior or middle managers, iGate board took the opposite stance.  It appears that the same yardstick isn’t being applied for background screening or it is being given lip service.

2.     Failure to Monitor & Control CEO Behavioural Risks

iGate board and senior managers chose to ignore the CEO behavior  As per media reports, the relationship was known to the staff. However, it appears no action was taken to guide or coach Mr Murthy.

Read these statements of Mr Murthy from prior interviews at the time of Patni takeover.

The National – “Everyone says that M&As are about ego. I’ve been a salesperson for 10 years. For every 100 doors that you knock on, 98 get shut in your face. That has knocked away most of my ego. I have two teenage boys who whip my butt in every game. They have gone from wanting to be on my team to not wanting to be on the loser’s team. Because of that, I have no ego left.”

Livemint – “Not at all. I am basically a conservative, middle-class south Indian Brahmin. As it is, we don’t like debt, and I am very uncomfortable with a $700 million (around Rs 3,180 crore) debt.”

Ms Araceli Roiz is 31 years old and Mr Phaneesh Murthy is 53 years old. In conservative South-Indian Brahmin families “divorce” is taboo. With two teen aged boys at home, he started an affair, if Mr Roiz version is true, when she was in her late twenties.

From a psychological perspective, it is a classic case of a talented man unable to deal with his own fallibility and mortality. Mr Murthy is a competitive man and the yearly success in his career may have made him feel invincible and powerful.  He is raised on Indian middle class values that look down on promiscuous behavior  He competes with his own children in games. He was heading an Indian IT organization where the average age of employees is 25-26 years. Does it look like he was suffering from mid-life crises?

The board members and other senior managers could have identified the emotional baggage he was carrying around and addressed the issue. The question arises, when the board knew about his weakness and character problem, was he provided any coaching or mentoring? Or did the board take the view, that as long as he is delivering the numbers, everything will be tolerated.

3.     Lack of attention to work culture

The board and management knew that Mr Murthy had a marked reputation in respect to female employees. Secondly, it appears that is relationship with Ms Roiz was an open secret. From his own words, it doesn’t seem that he took sexual harassment or company policies seriously. In the interview, he stated:

“It was a personal relationship. The company policy states that any two employees having a relationship have to inform the superiors. It is a small note in an employee handbook. I did inform the company about the relationship. Though it was a question of timing from my side as I disclosed this only a few weeks ago, only after the relationship was over.”

According to him, “it is a small note” in the company handbook.  He didn’t believe in walking the talk in personal ethics or corporate code of conduct. Hence, the question arises, what attention iGate paid to maintain the corporate culture.

With previous cases of sexual harassment against the CEO and an on-going affair, did iGate management ensure that the sexual harassment policies were implemented in spirit? If a woman, as per Roiz’s claim, was forced into a sexual relationship by the CEO, what effect did it have on other female employees and work culture? Did it not set the stage for the hostile work culture where women would feel insecure to report cases of sexual harassment? Let us say, another female employee was harassed by a male senior manager, what options does she have when she knows that the CEO is doing something similar? How seriously was sexually offensive behavior taken by the management?

 The organizations pay a heavy price in respect to sexually harassing culture. The direct costs are of course legal penalties and cases, however, the indirect costs are absenteeism, disengagement, high turnover and lower productivity. The iGate management appears to have ignored these aspects while hiring Mr Murthy and during his tenure.

4.     Ineffective Crises Management

iGate public relations team issued the statement – “The investigation, which is on-going, has reached the finding that Murthy’s failure to report this relationship violated iGATE’s policy, as well as Murthy’s employment contract. The investigation has not uncovered any violation of iGATE’s harassment policy.”

It gave information on the interim CEO and search for the new CEO, to rest fears of the investors.

This appears more of an attempt to limit legal risks. According to US laws the company is responsible for sexual misconduct by its employees. Subsequent to the above news, the company has not made any statement or explanation on what it did to prevent such incidents.

According to media reports, the Indian employees received an explanation from the senior managers on the incident and were instructed not to talk to people outside and within the organization. An instruction not to communicate with the media or put comments in social media is sound. However, not to communicate with fellow employees sounds like an attempt to silence. Can management stop the discussion outside office hours between the employees?

In such instances, various stakeholder expectations need to be addressed. It is a sensitive issue that gets the attention of public, bloggers, activists, women lobbies etc. Even the employees psychological stress levels increase and they need to be managed. However, from the information available in the media, there isn’t much effort being done to manage the crises.

Closing Thoughts

Sexual harassment cases cause huge reputation damage and legal risks. I am not sure whether after Mr Murthy’s previous cases, iGate got proper insurance coverage for directors and senior manager liabilities. Implementing sexual harassment policies and holding everyone to high standards of conduct is something organizations need to concentrate on. The issue was taken lightly previously, but now women workforce is increasing and so are the cases of harassment. Unless companies wish to have their name tarnished, they need to take the right steps.

References:

1. Read more: http://www.thenational.ae/business/technology/rise-and-fall-and-rise-again-of-it-star-phaneesh-murthy#ixzz2UBKIGikk
2. http://www.financialexpress.com/news/phaneesh-murthy-i-will-fight-sexual-harassment-charges-vigorously/1118857/1
3. http://timesofindia.indiatimes.com/tech/careers/job-trends/Murthy-scandal-iGate-staff-gets-social-media-code/articleshow/20222185.cms

Missing Men of Honor

The Story of Disgrace

A wave of shame and disgrace washed over Indian Premier League’s (IPL) Rajasthan Royals team. Three players of the team – S Sreesanth, Ajit Chandila and Ankeet Chavan – were identified as part of the spot fixing racket. Eleven bookies were involved. Investigators have found some evidence connecting it to underworld don Dawood Ibrahim.

As per police disclosure Chavan was paid Rs.60 lakhs by the bookies, Sreesanth and Chandila got Rs.40 lakhs each. By the number of matches they have played they would have earned a few crores each. The bookies lured the players by throwing parties and providing female escorts.

It is shocking that players with such international repute and excellent career opportunities would take a criminal route to earn money. One wonders what they were thinking. Were they joyously throwing up their hands in the air and dancing with happiness. Did they think that for a few millions they would be breaking the hearts, trust and expectations of billions of people, starting with their family?

It is reported that Rahul Dravid, the captain of the team suspected something. He made Sreesanth sit a couple of matches and the team managers asked him to leave the team. How painful it must have been for Dravid, a man reputed for gentlemanly conduct.

This isn’t the first time followers hearts have been broken by their idols. It started with the political leaders. Now the cancer has spread through all facets of life. Indian politicians – Gandhi, Nehru, and Azad – were known for their impeccable behavior  Congress leaders fought for Indian independence. They spent years behind bars to fight for a cause. Now Indian politicians spend time behind bars for corruption and fraud. Instead of feeling shame or humiliation, they get back into public life with renewed vigor to mislead people and make money.  Over 30% of Indian politicians have a criminal track record.

The new breed, who have joined the infamous bandwagon are senior managers of Indian corporates. After Satyam and 2G telecom scam, their names appear frequently for being interrogated by CBI and spending time in jails.

Valuing Honor in Our Lives

So where has honor disappeared? Previously, the mark of distinction for a man was when people referred to him as – “he is an honorable man”.  Having a dishonorable reputation was disastrous socially and professionally. Now, honorable men among leaders can be counted on figure tips.

As a world civilization, we need honor back in our bloodstream. Without it, humanity will reach new levels of depravity. We require men and women to work dedicatedly to get it back for the sake of next generation, though it is a challenging task.

The cynics will say it is a pipe dream and point out various flaws. The idealists look at the times gone by and wish the same could somehow come back. The practical breed has learnt to work like an automaton to earn a living and look at nothing else.

So where do we get our heroes who will change the world for us?  The heroes have to pay a price. Lincoln, Gandhi and King – were all assassinated because they dared to bring about change. From the first step to the end of their journey they made personal sacrifices. They repeatedly saw failures, their hearts sank with despair and somehow they gathered their strength to walk on thorns again.

In the present world, who would wish to trade the high life, luxuries and comforts for a life full of dynamite?

But unless we do so, we are bestowing the next generation a dangerous life.

So our choice is between our generation and the next. Do we want to look that far ahead?

Closing Thoughts  

When we talk about change, our hackles rise. Even when it is obvious that we should change, we don’t want to. That is a human failing which 100% of us have. Our best excuse is that we can’t change the world, who would listen to us, how can all the people change? But if we study change, we just need 10% of the people to believe in our cause. That is, we need to influence just 1 in 10 people in our life. That doesn’t sound very difficult; all of us are capable of doing it. So why not give it a shot, and bring honor back in our lives. I leave you with words of Dorothy L. Sayers from Gaudy Night:

“If it ever occurs to people to value the honor of the mind equally with the honor of the body, we shall get a social revolution of a quite unparalleled sort.”

References:

IPL match fixing 

Risk Managers – Tone Down That Report!

This week three renowned figures – Angelina Jolie, Larry Page and Christine Quinn – disclosed their medical problems to the world. They discussed battle with breast cancer, paralysis of vocal cords, and struggles with bulimia and alcoholism. Jolie, a woman famous for her beauty bared her mastectomy details. They talked about fear of death and handicap, and frailty of human character. They risked high-profile careers by being candid. One word describes their actions – Courage.

However, the corporate world wants to hide behind lies and window dress their weaknesses. The corporate leaders sometimes threaten risk managers and auditors to tone down their reports. The messengers of bad news get shot. Risk managers face bullying, retaliation and threat to their jobs for showing courage to speak the truth. If they refuse to bow down to pressure, the business teams label them as politically dumb or difficult to deal with. Question is – should risk managers tone down their reports to please the business teams?

I want to discuss a couple of scenarios here and you decide the course of action.

Scenario 1- Don’t report correct facts to avoid giving bad news

Let us say, you are a CXO of an organization. You have a heart problem and visit a doctor who is a good friend of yours.

The doctor realizes your heart condition is bad. You require a heart surgery for four bypasses. The doctor doesn’t want to deliver the bad news to you, because he doesn’t wish to hurt your feelings.

The doctor tells you  – “You just have too much stress. You need a vacation to relax and have some fun.” He prescribes you some vitamins and discharges you.

You follow your doctor’s advice, take a vacation. You swim and jog for a couple of days and have a heart attack. You arrive at the hospital with a survival chance of 5%.

Did the doctor do the right thing by not telling you the truth?

Scenario 2 : Don’t report correctly to protect a friend

A civil engineer responsible for doing quality and inspection checks of a bridge notices that sub-standard quality of material is used. There is a high risk of bridge collapsing. However, he issues a clean report to his seniors because the engineer-in-charge of the bridge is a friend of his.

An organisation’s senior managers drive daily across the bridge to reach their office. One day all of them are on the bridge and it collapses. All die.

Would the families of the senior managers be happy with the quality control engineer’s for not disclosing the risks?

My guess is most of the corporate readers would have answered no. You would have preferred the truth when it is a question of your own life being at risk.

Corporate Scenario

So why don’t corporate citizens hesitate when they put other people’s life at risk. See the Bangladesh factory fire, Japan’s nuclear disaster or US banks home foreclosure and mortgage mess. Employees, customers and public lives or life savings were put at risk.

Wouldn’t a few honest risk management reports helped in fixing the problem in time to prevent the disasters?

The corporate world maintains double standards on reporting risks. They want full disclosure of the risks to them but not to others. Before setting these expectations, corporate citizens should answer these questions:

1) Isn’t it a risk manager’s job to identify the health problems of the organization, prescribe a cure, suggest amputation where required and nurse the organization back to health?

2) Is it right to compromise professional ethics and code of conduct to keep a few people happy?

3) Aren’t risk managers responsible for calculating the direct and indirect cost to others for non-disclosure of risks?

4) Shouldn’t risk managers hold their ground and stick to their independent advise as you will benefit from it in the long-run?

Closing Thoughts

Moral courage is one of the most difficult qualities to acquire. Larry Page, as CEO of Google fulfilled his responsibility to the investors by publicly disclosing his medical problems. Now the investors can make an informed decision. One has to admire Page for taking such a difficult call. It takes guts. Disclosing personal weakness makes one feel vulnerable, exposed and fallible. He has shown the path for corporate leaders to follow.

Leadership of Dead Bodies, Stones and Flowers

In April, two Air India pilots handed over the controls in auto-pilot mode to two female cabin attendants to take a short nap. They decided that their sleep was more important at 33,000 feet while flying the 160-passenger flight from Bangkok to Delhi. They returned to the cockpit after 40 minutes when one of the cabin attendants accidently knocked off the auto-pilot mode.

The angry Twitterate asked for pilot’s license suspension, removal from job and legal charges for culpable homicide. Everyone questioned their work ethics and shock at their irresponsible behavior. Air India investigated the incident, suspended the pilots and sated that passengers’ safety was never compromised. Unbelievable, how can passengers be safe without any pilots at the helm?

1.     Double Standards in Evaluating Corporate Leaders

 The pilots were crucified for risking the lives of passengers. However, surprisingly the pilots of the corporate world do not suffer the same fate. The wizards and titans of the banking industry crash landed the world economy, but they didn’t lose their CXO seats.

Look from another lens. Did any senior in Supplier Company or the multinationals lose their job in the Bangladesh factory fire? In Foxconn, the Apple contractor, 11 employees committed suicide, four died in an accident and one collapsed after continuously working for 36 hours. However, Steve Jobs was rated as the second most popular leader by the CEOs in a survey conducted by Price Waterhouse Coopers. The first and third were Winston Churchill and Mahatma Gandhi respectively.

Now this is going to rattle my readers but let me say it. Steve Jobs was a great inventor, designer, strategist and marketer. However, when it came to people, his employees considered him rude and manipulative, and his competitors found him uncivil. Though Apple achieved great heights, he paid low salaries to the employees in the Apple stores, paid no dividends to the shareholders, pushed down suppliers to manufacture at lowest possible rate and didn’t believe in charity or corporate social responsibility. His behavior and actions weren’t people centric or humanity oriented. So my question is – do we consider him a great leader because he managed to put Apple on top? That makes him a great CEO, not necessarily a great leader.

2.     Misconceptions of Leadership

 The problem arises due to the definition of leadership. Read the dictionary meaning:

Leadership is “organizing a group of people to achieve a common goal”.

- We don’t focus on how the group of people were gathered; by inspiring them or arm-twisting them.

-  We don’t focus on the nobility of the goal; was it to exploit others or liberate them.

-  We don’t focus on the method adopted to achieve the goal; was it by breaking the rules or a journey of virtue.

In the present world we see leaders leaving dead bodies in their path, walking over people as if they were stones and sucking the life out of them. Great leaders create leaders not followers, they make others blossom like flowers.

Be it a corporate leader or political leader, we don’t wish to question the leadership methods. Our thinking is, how it matters to us, we have nothing to lose. We have everything to lose, and Martin-Niemöller-Foundation words at Hitler’s time still resonate:  

“First they came for the communists,
and I didn’t speak out because I wasn’t a communist.

Then they came for the socialists,
and I didn’t speak out because I wasn’t a socialist.

Then they came for the trade unionists,
and I didn’t speak out because I wasn’t a trade unionist.

Then they came for me,
and there was no one left to speak for me.”

Our own silence will kill us and the society we live in. When humanity is at stake, can we close our eyes and say nothing is at stake.

3.     Leadership Training

The Institute of Strategic Change reported that – “the stock price of ‘well-led‘ companies grew by over 900% over 10 years, compared with 74% for poorly led companies”. Warren Bennis in 1998 said – “The Truth is that no one factor makes a company admirable. But if you were forced to pick the one that makes the most difference, you’d pick leadership.” However, how many companies train on leadership or do a performance evaluation on leadership qualities?

Quite a few would be saying we do it. So let me clarify. In organizations bosses tell the juniors what to do and how to do it. They give rave reviews to the employee who completes the task as they had stated. They promote that employee and now he becomes a boss. At best, he will be a good manager, not a leader.

Corporate world determines success rate by title and salary.  Neither guarantees leadership skills. Employees aim to become a boss, not a leader. The terms are not synonyms.

According to Malcolm Gladwell,  all outliers practiced their talent for over 10,000 hours to achieve greatness.  In the corporate world, how many hours are dedicated by each employee to learn leadership? Learning leadership is a by-product of the main job, till CEO level. Then isn’t it surprising that we do not have many great leaders in the corporate world.

 Closing Thoughts

Maximum damage in the world was caused by people who got powerful positions without good leadership qualities, be it Hitler, Jeff Skilling, Bernie Madoff or Lance Armstrong. The biggest risks in the corporate world are leadership risks. It is the leaders who make the decisions, so unless we have a system of putting the right people in leadership positions we will continue to have these disasters. Hence, our job is to develop good leaders, select good leaders and continuously monitor the leaders.

 Wishing my readers a Happy Mother’s Day. Being parents is the toughest job in the world,. They are responsible for raising the next generation of leaders.

References:

1. Air India Pilots Story  
2. Deaths in Foxconn
3. Price Waterhouse Coopers report on best leaders

 

Happy Woman’s Day – Wishing More Power to Women

Whatever a woman wears shocks some man on this earth. A bikini-clad woman will most probably shock Indian urban male sensibilities, a burqha-clad woman will shock a French man, and a woman wearing a ghoonghat would shock an American. Still people judge a woman by what she wears. In patriarchal societies, character and sexuality of a woman is the same thing. Chastity, virtue and good character of a woman are prime importance. Men do honor killings in its name. What purpose do they serve? If women are not supposed to have sex with men, then is society promoting gay behavior?

In India, a country that was progressive in before Christ era, the situation has deteriorated with each passing century. India is the 4^th unsafe place for women in the world. Times of India reported that in Bangalore, 64% women feel unsafe to commute at nighttime. In rural India, situation of women is worse. They do not even have an education. Women face physical, emotional and psychological abuse every day.

1.      Virginity & Sexuality

The propaganda is that Hindu mythology books –Ramayana and Mahabharata – define the ideal woman. It is convenient; Sita the female protagonist in Ramayana is the ideal woman. Mahabharata depicts characters that are more realistic. For example, Draupadi, the heroine of Mahabharata had five husbands. In present day, men definitely can’t accept polyandry. Her mother-in-law, Kunti, gave birth to a son, Karan, before marriage. Her three sons after marriage were from different fathers as her husband was impotent. Draupadi was publicly disrobed and it is the men who are projected in negative light. The book shows both Kunti and Draupadi in positive light.

Presently, in Indian society looks down on women having sex with different men or having a child before marriage. Mahabharata was depicting a time period of 10^th century BC, and we call ourselves broad minded.

2.      Marriage and Dowry

One of the most negative customs in Indian society is that of dowry. As a good girl of Indian society should have an arranged marriage, her parents have to pay a big fat dowry to get a bridegroom. A woman is supposed to let her parents choose her husband.

In ancient India, the concept of Swaimwar existed. The parents of the girl would organize a Swaimwar, inviting eligible men for the marriage of their daughter. The daughter could run tests on the men, and choose her own husband. Even kings had to take rejection gracefully when they attended a Swaimwar.  It was the woman’s choice, and neither the parents nor the participants could change the decision.

Rape was punishable in some cases with death and in all situations; a woman’s consent was required for sex. For sex or marriage, a woman did not need her parent’s permission and could independently decide.

Women received “Stridhan” (wealth of a woman) at the time of marriage. This money and property was given to her by her and her husband’s relatives to use in case of emergency and/or on death of her husband. Even her husband was not entitled to use the money generally.

However, now the girl’s parents are pressured to give money to the bridegroom’s parents, and the girl doesn’t get any of it. In some cases, in rural India, if a girl chooses a lover or husband, she is killed to retain family honour. Rate of female infanticide is high because parents don’t wish to have liability of a girl. Tragically, the olden concepts have been twisted to fulfill power and greed.

3.      Widowhood, Divorce and Re-marriage   

Widowed and divorced women are socially excluded, as they are considered unlucky. Both are a social stigma. Hence, remarriage of divorced or widowed women is difficult.

It is incredible, that Kautilya’s Arthshastra defines the conditions of divorce, desertion and widowhood. He also mentions the period of separation and remarriage for divorced and widowed women. Islam and Sikhism accepted divorce and remarriage since inception.

The social custom of sending widowed and deserted women to temples to live a life of abstinence was more of an economic need than religious requirement. Even Sati (wife burning herself on her husband’s pyre) was a way to save money, in the name of chastity and virtue. Widowed and deserted women then would not require significant monetary support if it is propagated that they should not live a life of luxury.

Again here, the social customs were twisted to suit monetary ends. The tragic part is that these are done in the name of religious mandate. Hence, few would challenge the customs openly. We need to change the mind-sets to succeed in a global environment. India can’t succeed when 50% of its population is tied up in such draconian customs. Let us focus on independence and liberation of women in this century.

Closing Thoughts

Well, one can only argue with men up to a point. So I thought let me be open-minded and consider their perspective. Maybe one can decide a character of a person by the clothes they wear. I need a little bit of help form my readers. Could you look at the following pictures, and tell me which man has the best character. I am not blind yet, so I could figure out who looks the sexiest, but drastically failed at assessing character.

Wishing a Very Happy Woman’s Day to all my readers.

Two Ethics Questions to Mr David Cameron

David Cameron recently visited India with a huge trade delegation to improve the bilateral relationships. Of course, with India’s growing power, world’s senior politicians and business heads are now coming to India every week. However, what made Mr Cameron’s visit remarkable were his two comments he made in respect to British colonial rule.

Though I generally keep away from commenting on political aspects, the hypocritical stance was just too amazing to ignore. Indians sometimes see this behaviour from whites in India. For instance, a British man recently said to me – “All Indians are slaves, we British are superior.” I have no idea on superiority or inferiority of any human race but Indians are definitely not slaves. Obviously, the deluded old chap lived in a different world. Point to note is, Roman traders introduced the concept of slaves to India, and Mughal rulers practiced slavery in India for the first time.

The British rule was an attempt of minority ruling the majority. That is only possible by fear and terror. While Indian rulers believed in servant leadership. British ruled the population in a significantly inhumane autocratic leadership style that Indians did not have much experience in dealing. That resulted in quite a few atrocities and it brings me back to Mr Cameron’s comments.

1.      Jallianwala Bagh Massacre

David Cameron, the British Prime Minister, visited Amritsar’s Jallianwala Bagh and laid a wreath at the memorial. Cameron considered the massacre “deeply shameful event in British history” but did not apologise for it. Before this, Queen Elizabeth had paid a visit to the same memorial in 1997 and laid a wreath. One is not sure what the British leaders are attempting to convey by these gestures.

Here is the historical perspective. On April 13, 1919, British troops opened fire on unarmed civilians, including women and children who were celebrating the Sikh festival Baisakhi at Jallianwala Bagh. The British estimated 379 dead and approximately 1100 wounded. Indian National Congress estimated 1000 dead and 1500 wounded.

The order was given by Brigadier-General Reginald E.H. Dyer. He was forced to retire from army, however was celebrated as a British hero. His actions were so twisted that when an Englishwoman, Miss Marcella Sherwood reported she had been molested on the streets of Amritsar, he issued an order requiring all Indians (men) using that street to crawl its length on their hands and knees. General Dyer said that – “Some Indians crawl face downwards in front of their gods. I wanted them to know that a British woman is as sacred as a Hindu god and therefore they have to crawl in front of her, too.” He was never punished for any of his actions nor was tried in court.

Under British rule, Indians suffered numerous inhumane acts. From the present day British leaders’ perspective, I would say that they cannot undo the past. Indians definitely are not waiting for an apology. However, using the gesture for political mileage, most probably to get Indian votes in Britain in the next election is a little bit too much to swallow.

The other aspects I find hypocritical are the double standards maintained. When Germans killed Jews, it was an inhumane act – “crime against humanity”. The Nazis were tried in Numerban trial and hanged for their war crimes during Second World War. Even until date, a list is maintained of the missing Nazi’s. American President Mr Franklin D. Roosevelt  and British Prime Minister Mr Winston Churchill, both were involved in the decision.

I absolutely agree that Hitler’s rule was atrocious. I have one observation – If atrocities are done on Americans and British it is a crime against humanity. If they do atrocities on people of other countries, then those people do not even deserve an apology.

How does one justify this stance on ethical standards?

2.      The Kohinoor Diamond

India requested David Cameron to return its Kohinoor Diamond and he responded – “I certainly don’t believe in ‘returnism’, as it were. I don’t think that’s sensible.”

Kohinoor diamond was discovered in Karnataka mines and the first mention is in 13^th century. It is one of the most well known diamonds in the world. Presently, it is set the in the British crown of Queen Elizabeth and is displayed in Tower of London.

The British acquired the diamond from India in 1850. Raja Ranjit Singh of Punjab owned the diamond and in his will bestowed it to Jagannath Puri temple. However, on his death in 1839 British administrators did not execute his will. In March 1849, British formally proclaimed Punjab as part of British Empire in India.  In terms of the treaty they mentioned that the “gem shall be surrendered to Queen of England”.  Lord Dalhousie treated it as spoil of war. He made the 13-year-old conquered prince Dulip Singh, to travel to England to present the diamond to the Queen.

India was a rich country when British arrived in the 17-century AD. They took away precious jewels from the kingdoms they captured. Most of them cannot be directly identified; however, Kohinoor is part of Indian heritage.

My question is – Is it ethical for a country to keep other countries national treasures? What if the roles were reversed? What would the world expect from India then?

Closing Thoughts

India is catching up with the developed countries and now ranks 9^th in the world in respect to Gross Domestic Product. Indians are confident of doing better in the 21^st century. Hence, they are not looking for rehashing history, as it can never be changed. Indian religions teach forgiveness as the greatest virtue. However, it does not mean Indians have forgotten the past and are gullible enough to be taken for a ride. Now as more world leaders visit India to take advantage of the large consumer market, they need to do far better. A new world order is establishing and India is in a position to choose the best partners.

References:

1. List of Most Wanted Nazi War Criminals according to the Simon Wiesenthal Center
2. Nuremberg Trials
3. Kohinoor Diamond
4. Britain GDP

Fraud Risk Management in Ancient India

Presently, the Serious Fraud Investigation Office of India lacks sufficient powers to initiate investigations and prosecute. The Central Bureau of Intelligence isn’t independent due to which politicians escape prosecution for corruption and money laundering. Indian police force Economic Crime wing doesn’t have expertise in dealing with electronic and financial frauds. The legal system is pathetic and takes a long time to prosecute white-collar criminals. India has a shortfall of trained fraud investigators as it hardly has any courses for students in this line.

All these aspects may make you think that Indians are new to the concept of fraud risk management. This is far from the truth. Kautilya addressed financial fraud risks in 4^th century BC and most of the concepts are still used presently. Let me narrate you some of the concepts he formulated in earlier times.

1.      Formation of a Central Investigation Agency

Kautilya proposed a central investigation agency for a kingdom to do espionage work. A network of spies located in different parts of the kingdom reported information to their handlers. The handlers in turn checked the authenticity of the information from three sources and if correct reported to the agency. The spies did not have direct contact with the agency to conceal true identities..

Spy selection depended on character and social position. Spies were recruited from all sections of society. Spies were positioned in all the departments and commercial ventures of the king to ensure that the head of the departments do not abuse their power or cheat the king. Women were considered particularly useful to penetrate wealthy households to get the inside story. In current India, there is a scarcity of female fraud investigators as it now considered a masculine job. However, in ancient India, women investigators and spies were quite common.

2.      Types of Financial Frauds

Kautilya identified 40 ways of embezzlement. Some of them are mentioned below:

• Overpricing and under-pricing of goods
• Incorrect recording of quantity of raw material and other stocks
• Misappropriation of funds
• Teaming and lading
• Misrepresentation of sources of income
• Incorrect recording of debtors and creditors
• Incorrect valuing and distribution of gifts
• Inconsistency in donations and distributions for charity
• Misappropriating goods during barter exchange
• Manipulating weights and tools for measurement
• Misrepresentation of test marks or the standard of fineness (of gold and silver)

It is interesting to note that Kautilya mentioned most of the frauds that occur in accounting and preparation of financial statements. It shows human psychology has remained the same. However, in India the value system has deteriorated that has resulted in increased fraud and corruption. In olden times, the value of honour was held high. For example, the prime thought in Hindi was - “prann jiye pur vachan na jiye.” (meaning – it is better to lose one’s life rather than go back on a verbal promise given)

3.      Mechanism for Investigation and Punishment

The investigation process was quite similar to the current process followed. Information was initially gathered regarding the fraud from informants, spies, whistle blowers and audits. Background information of the suspects was gathered by sending spies to their residence and business premises.

Subsequently, the people involved, the suspects and witnesses were interrogated. Kautilya suggested separately examining ” the treasurer (nidháyaka), the prescriber (nibandhaka), the receiver (pratigráhaka), the payer (dáyaka), the person who caused the payment (dápaka), the ministerial servants of the officer (mantri-vaiyávrityakara)” for financial frauds. If any person lied, s/he received the same punishment as the main culprit.

Another fascinating aspect is that India doesn’t not have any law similar to the whistle blower provisions of Dodd Frank Act. However, Kautilya proposed -  “Any informant (súchaka) who supplies information about embezzlement just under perpetration shall, if he succeeds in proving it, get as reward one-sixth of the amount in question; if he happens to be a government servant (bhritaka), he shall get for the same act one-twelfth of the amount.”

The punishment for fraud depended on the nature and value of fraud. It ranged from nominal fines to death penalty. The victim was compensated for the losses suffered.

Closing Thoughts

The processes proposed by Kautilya for fraud detection were followed even until the Moghul rule. However, these were dismantled during the time of British Rule as the Indian Penal Code was formulated.  The difference between Mogul rule was that Moguls settled in India, marriages took place between Indian royalty and Mogul rulers and the culture got integrated over time.

The British came to rule for economic purposes. They wished to take advantage of India’s natural resources and vibrant economy. They levied their own rules and did not integrate them with the Indian culture. Hence, over time the Indian value system was lost or kept for namesake only. Overtime, as even after independence the British education system was used, a split ethical value system developed between personal values and business ethics. Therefore, corruption increased in the business environment till it became all-pervasive in the society. It is going to take a lot of effort to change the system now. No short-term solutions  will work.

Accounting and Auditing in Ancient India

Professionals want to know the origin of their profession, the work done in olden times and the level of knowledge. I thought of sharing with you the history of Indian accounting and auditing profession. I discovered in Kautilya’s Arthshastra that it existed in ancient India in 4^th century BC. Therefore, my guess is that it would have originated at least a few centuries earlier.  The accounting principles and standards used in the present century are similar to those that existed in the 4^th century BC. This nugget of information may have surprised you.

Broadly, Kautilya’s Arthshastra covers accounting principles and standards, role and responsibilities of accountants and auditors, the methodology of accounting, auditing and fraud risk management, and the role of ethics in managing financial activities. Let me share some of the concepts with you in the next couple of posts.

1.     Maintenance of Accounts

The accounting financial year was fixed to July-June period and with a full process for closure of accounts and audit of the same. It covered the method of consolidating the accounts from various departments of the government to assess the net income and loss. The accountants were required to furnish the completed annual accounts to the head office mid-July. Delay and/or failure to do so attracted financial penalties.

 2.  Classification of Receipts

 Kautilya states that “receipts may be (1) current, (2) last balance, and (3) accidental (anyajátah= received from external source).” In it, he differentiates between cash receipts and debtors, current and accrued income, income from other sources, windfall gains, and recovery of bad debts. He recognized the concept of risk and suggested different rate of interests for loans. Foreign trade loan attracted the highest interest, as the returns were uncertain.

3. Classification of Expenditure

Expenditure classification was similar to receipts classification and included the differentiation between capital expenditure and revenue expenses. Kautilya described it as – “Expenditure is of two kinds—daily expenditure and profitable expenditure.” The difference between income and expenditure was termed as “net balance”. He insisted on making long-term investments in construction and other works as these would generate profits over a period. It also entailed keeping track of work in progress.

4. Role and responsibility of accountants

A hierarchical organization structure of senior to junior accountants existed within the king’s treasury function. The accountants maintained books of accounts on an annual basis according to prescribed standards. The same were furnished for audit at year-end. Kautilya suggested good salaries to accountants and auditors as high income would keep them ethical. Accountants would be more prone to commit fraud if they earned very little.

5.     Segregation of Roles of Treasury and Auditor

The fascinating part of Kautilya’s approach was that he recognized conflict of interest between finance and auditing functions. He categorically stated that the head of finance and head of audit should independently and separately report to the king. He recognized the possibility of collision between the two. In India, in the government the Comptroller General of Audit and Ministry of Finance are two separate functions. However, in the corporate world still in quite a few companies chief audit executive are reporting to chief financial officer rather than the chief executive officer.

6.     Building an Ethical Culture

Kautilya believed character reflected personal values of individual and ethical values learning must commence from childhood. Even as an adult ethical conduct was as important as professional skills. He proposed measures to build ethical climate in the kingdom. However, he was practical and recognized the potential of corruption. In accounting, he talked about misstating financial statements due to abuse of power and fraudulent reporting. He devised a system of reward and punishment to ensure compliance to rules and regulations.

7.     Verification and Auditing of Accounts

The concept of continuous monitoring, periodical auditing, verification and vouching existed in ancient times. Checks were done daily and periodically (five nights, pakshás, months, four-months, and the year). The attributes used in the present day for verifying income and payment vouchers were also used in earlier times. Interestingly, each department had spies to provide information and report wrongdoing to the seniors. There was a full process for discovering fraudulent transactions and punishing accountants for misstating financial statements. I shall cover that in the next post.

Closing Thoughts

Kautilya prescribed the accounting theory that included bookkeeping, preparation of financial statements, auditing and fraud risk management. He considered accounting as an integral part of economics. Various kingdoms in India used his work until the 15^th century AD i.e. before the colonial rule. I am not aware whether similar level of knowledge existed in other parts of the world before the Christian era. If you do have information, please share it with me. It will be an enthralling journey into the past.

References:

Kautilya’s Arthshastra 

Money Can Buy Everything

A woman called me up recently and said that someone is willing to pay her huge amount of money for investment in her business. Problem was, they did not want to disclose their identity and would be transferring money from Sri Lanka. I told her I suspected that the people involved are attempting money laundering. She believed the same and refused the transfer of funds.

I realized that the people behind white-collar crime believe one thing – “Money can buy everything”. That is the core motivation. Otherwise, professionals earning huge salaries would not be rationalizing fraud. The American money market economy reiterates this concept; hence, even the normal people are pursuing money blindly. All relationships and every person seem to have a price. So let me ask you the question:

Now let me paint you a picture of the future world. In that world you do not have to produce kids, no woman has to get pregnant and tolerate the pregnancy woes for nine months. Whenever you feel like becoming a parent, you just have to visit a shop. Lifeless kids’ bodies are available of all sizes and shapes. When you choose one, the shopkeeper installs a battery and wham, the kid is alive. You can choose a new-born, a two-year-old etc. at a certain price.

Next, you don’t have to train the child on anything if you don’t want to. You have the option of raising the child the normal way or using patches. For example, if you wish your child to learn cricket, you just purchase a patch and install it, and the kid knows cricket.

Contemplate the advantages of this situation. As a parent, you won’t have to spend countless hours changing dirty nappies and watching the child struggle to learn to walk and talk. Mothers won’t have to sacrifice their professional and social life. You won’t have to sacrifice Dhoni and teams match to watch your son’s floundering attempts on the cricket field. You won’t have to watch your daughters giving a disastrous dance performance. After these, you won’t have to give a beaming smile and make it sound that it was the greatest performance in the world. You won’t have to make any sacrifices. There will be no pain, no tears of frustration and no disappointments. So now, let me ask you a question.

If you have answered that you would prefer the natural way, then the question is why? Why choose hard work, heartbreak and pain over an automatic high quality child? The reason goes back to root of our psychology. Raising a child gives purpose and meaning to the life. When our child does well, we feel a sense of satisfaction, accomplishment and pride. The joy and happiness we get are worth all the tears, heart breaks and sacrifices. Parents put their life on hold for 20 years to raise a child and then the child leaves home to make his/her own life. If you look it from a financial angle, it doesn’t sound much of a deal. Yet, nearly every adult wants to do it.

If I look this from another angle, another basic human need is sex. Hence, according to this viewpoint  prostitution should be legal in all countries (It is illegal in India). There should be no moral judgment on purchasing sex. The question is then why do the people who use prostitutes don’t stay with them? Why do they come back home? Why do most of them go back to the same prostitute rather than try a new one every time? The reason is simple. However good the sex was, it doesn’t give a sense of belonging. Objects don’t give happiness, relationships do. Commoditizing takes away the warmth, peace and happiness.

The same difference applies for money earned through hard work and by frauds. Money earned the wrong way doesn’t give you pride and joy. I think all of us remember our first salary and the sense of “I did it”. The salary was peanuts in comparison to twenty years of studying hard. But we remember the first salary till our dying day.

In my opinion, money can only give a comfortable standard of living and nothing more. We don’t even need money even power, recognition and status. We simply are getting lost in the mad race.

Closing Thoughts

Today is Mahatma Gandhi’s death anniversary, one of the most recognized and respected leaders of the 20^th century. Even in this day and age, his dhoti, shawl and chapel can be purchased in India in less than Rs 1000/-. In President Obama’s inauguration ceremonies, Michelle Obama’s clothes were a topic of discussion. Some would argue that present days leaders need it. I think if Gandhi ji had been alive today, he would be living in less than Rs 20,000/- a month.  We need to re-look where we are heading in the mindless pursuit of money while convincing ourselves that our life in other areas is fine. As Mahatma Gandhi said – “One man cannot do right in one department of life whilst he is occupied in doing wrong in any other departments. Life is one indivisible whole.”

Justice Verma’s Report – A Respite for Indian Women

Justice Verma’s report besides covering sexual harassment at workplace also covers other crimes committed on women. Most of these questions were never raised or those who raised them were unheard. Nevertheless, for a civilized democratic nation, the existing social attitudes need to be challenged. India cannot become a global super power when it is the fourth unsafe country in the world for women, nearly 50% of its population. It is our duty to question existing archetypes, advocate change and bring about new thinking.

India was among the few countries that gave equal rights to women on Independence in its Constitution. Mahatma Gandhi thoughts reflected his open thinking in the following words. Let us make them a reality in this century.

“Woman is the companion of man, gifted with equal mental capacities. She has the right to participate in the minutest details in the activities of man, and she has an equal right of freedom and liberty with him. She is entitled to a supreme place in her own sphere of activity as man is in his. This ought to be the natural condition of things and not as a result only of learning to read and write. By sheer force of a vicious custom, even the most ignorant and worthless men have been enjoying a superiority over woman which they do not deserve and ought not to have. Many of our movements stop half way because of the condition of our women.”

The issue is at the heart of Indian society and below are few points from the report that I wish to bring to your attention.

1.     Rape and Sexual Assault

The Indian Penal Code defines rape as:

“A man is said to commit “rape” who, except in the case hereinafter excepted, has sexual intercourse with a woman under circumstances falling under any of the six following descriptions:—

First.—Against her will.

Secondly.—Without her consent.

Thirdly.—With her consent, when her consent has been obtained by putting her or any person in whom she is interested in fear of death or of hurt.

Fourthly.—With her consent, when the man knows that he is not her husband, and that her consent is given because she believes that he is another man to whom she is or believes herself to be lawfully married.

Fifthly.—With her consent, when, at the time of giving such consent, by reason of unsoundness of mind or intoxication or the administration by him personally or through another of any stupefying or unwholesome substance, she is unable to understand the nature and consequences of that to which she gives consent.

Sixth.—With or without her consent, when she is under sixteen years of age.”

In Indian society, few women are able to exercise their right to object or say no. Men obtain consent through psychological, emotional, financial and physical coercion and threat. The popular concept is that rich men do not rape, it is only poor men who rape women. If a rich man obtains consent through coercion, the women agreed. The standard should be clear. Any man who forces himself on a woman when she has said no is attempting rape. Sex with a woman when she is opposing or resisting is rape. Consent given out of fear or criminal intimidation is rape. Period.

The situation of an Indian wife is the worst possible in the world. Every woman in the world has a right to say no, except an Indian wife. She is duty bound to have sex with her husband. For the first time Justice Verma has included marital rape. Wife is not a property of the husband and has the right to revoke her consent to sex during the course of her marriage. The report states- “A rapist remains a rapist irrespective of the relationship with the victim.” In mordern context, marriage is a relationship of equals and consent cannot be assumed as implied.

Secondly, rape victims face extreme humiliation in courts when their past personal life is dragged for discussion. The defense lawyers ruin the reputation of the victim by bringing past love affairs. In Indian society, if a woman has sex outside of her marriage she becomes characterless. The whole attitude adds insult to injury. Justice Verma has recommended that a woman’s past life cannot be a subject matter for debate in court in a rape case.

It requires extreme courage in India for a woman to report rape and most of the cases go unreported due to the social stigma a raped woman faces. She is ostracized and alienated by the society and her reputation is ruined. The abusive men proudly boast about their power and accomplishments in brow beating women into submission. This attitude needs complete revamping as it distorts the justice system. Society should view rape as a crime and not evaluate it on a shame-honor paradigm as it puts the victimized woman on trial instead of the rapist.

Sohaila Abdulali, a rape victim had succinctly put it – “Rape is horrible. But it is not horrible for all the reasons that have been drilled into the heads of Indian women. It is horrible because you are violated, you are scared, someone else takes control of your body and hurts you in the most intimate way. It is not horrible because you lose your “virtue.” It is not horrible because your father and your brother are dishonored. I reject the notion that my virtue is located in my vagina, just as I reject the notion that men’s brains are in their genitals.” This brave heart has the courage to break the rigid thinking and fight against atrocities.

2.     Eve Teasing and Stalking

The Indian Journal of Criminology and Criminalistics (January- June 1995 Edn.) has categorized eve teasing into five heads viz. (1) verbal eve teasing; (2) physical eve teasing; (3) psychological harassment; (4) sexual harassment; and (5) harassment through some objects. In India the safety of women is at risk in all public places and not just the workplace. Women are sexually harassed in public spaces by men making unwarranted comments. In some cases, the obscene words and gestures seriously impact the dignity of women.

A minor girl in India from the time of achieving puberty becomes a target of eve teasing. As India is a conservative society, she learns to suffer the indignities quietly. As such with the parental attitude that girls are a liability, Indian girls have a low self-esteem. They are trained to behave according to “what will people say”. Hence, the young unsure girl suffers psychologically and emotionally without an outlet since she cannot share her “shame”. If she does so, she will be shunned.

For men it is just an entertaining pastime to demonstrate their machismo. They generally go unpunished due to the lax implementation of criminal action in these cases. Women hardly report the cases to police though eve-teasing is a criminal offence

Justice Verma’s report gives recommendations to curtail eve-teasing. He has suggested  deputation of female police officers at public places, installation of CCTV cameras in public places, filing of police complaints by public transport and public place operators etc. These are steps in the right direction.

If a man wishes to talk to a woman, he can do so in a graceful and dignified manner without offending the sensibilities of the woman. He does not need to stalk a woman, behave in an uncouth and uncivilized manner to get attention. Moreover, if a woman has rejected his advances, he should accept that gracefully. His interest and her rejection do not give a right to harass and abuse her. The women should not adopt a defeatist attitude or try to convince themselves that the man is showing affection and liking. He is blatantly saying that he does not respect you or your wishes. Thankfully, Justice Verma’s report has included stalking as a criminal offense.

Closing Thoughts

Courage is not the absence of fear. Courage is about fighting fear tooth and nail in every step we take to define a new path. The educated women and men of India need to fight this battle for their less privileged counterparts. When Indian women could fight shoulder to shoulder in the non-violent struggle for Indian Independence, they can fight now too. In life, always the crazies have brought about change. Don’t be scared to be marked as quirky or non-conformist, you are in good company. Before Independence, British thought Mahatma Gandhi as a fruitcake. The point is, no one will fight your battle for you. We need to do it for ourselves. Progress of Indian women serves India’s national interest. Hence, let us move forward with courage and conviction to redefine the status of women in Indian society

References:

Report of the Committee on Amendments to Criminal Law – Justice Verma,