Recently a string operation exposed money laundering services provided by some Indian private banks. The employees and bank managers were caught on camera advising the disguised reporter on ways and means he can convert his illicit money into legal money.
1. Caught in the act
Some of the helpful advice given by bankers included:
Open multiple accounts so that the amount remains below the reporting limits. Do not deposit over Rs 10 lakhs (Rs 1 million) in a single instance.
Obtain a demand draft from a Cooperative Bank and deposit the draft with us. Cooperative Banks do not require an account hence it will be easy to obtain a draft. Since cash would not be directly deposited and private banks do not have to check the source of funds, the deposit will not raise any alerts.
Route the cash money through another bank to avoid detection.
The Income Tax act prohibits keeping cash in bank lockers. However, if you do not inform the bank staff, they can look the other way.
Open an NRI account and slowly transferring the money offshore. We need a passport and visa for opening an NRI account. No pan card required. Deposit Rs 25 lakhs per month. Better still start by opening a NRO account.
The bankers offered to visit the client’s residence to open an account and collect the money. One has to watch the video clippings to see the level of customer service provided by the bankers. No one can say they were not being helpful.
2. Standard response from senior management
As expected the senior management of the banks denied all knowledge, claimed they maintained highest ethical standards, suspended the branch managers and the staff, and commenced an internal investigation. But this is an open secret. Every business person in India knows that the banks will help them convert black money into white and transfer illegal money. If it was not so, how can a parallel black money economy exist in India for so long. Did the expose really shock anyone?
3. Lip service by regulators
Of course Reserve Bank of India has given detailed guidelines on Know Your Customer and submission of suspicious transaction reporting. There is only theoretical application of guidelines of Financial Action Task Force (FATF) on Anti Money Laundering (AML) standards and on Combating Financing of Terrorism (CFT). The Financial Intelligence Unit of India received just over 30,000 suspicious transaction reports in 2011-2012. It received 100,00,000 cash transaction reports. If you read these numbers in reference to the size of banking business in India, it would not be even .01% of the total yearly transactions.
In February 2012, the director of the Central Bureau of Investigation had said that Indians have $500 billion of illegal funds in foreign tax havens, more than any other country. Some reports estimate the amount over a trillion.
Hence, can we actually believe that regulators and bankers are serious about preventing money laundering in India? The annual report 2011-2012 of Financial Intelligence Unit doesn’t really mention any investigations done that would make the bankers uncomfortable. In India the detection and investigation capabilities of financial regulators is still in nascent stages. Unlike US which has full-fledged organizations and systems to check money laundering.
Closing Thoughts
In the pursuit of growth numbers bankers are willing to compromise ethics and legal requirements. However, in Indian society because of the high level corruption, most businesses are doing the same. In such a scenario, it amounts to pot calling the kettle black. Unless we really get serious about removing corruption, as a society we can’t succeed. Some things required are – public to withdraw support from companies using unethical practices to succeed, regulators take organizations to task, and government prosecutes politicians and other individuals for dealing with illicit money. Till this happens only media will benefit by doing exposes to improve their ratings.
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 4th 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 10th 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.
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 13th 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 9th in the world in respect to Gross Domestic Product. Indians are confident of doing better in the 21st 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.
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 4th 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.
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 4th 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 4th 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 15th 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.
Would it be fair to assume most of us believe that employee selection and background screening processes were formed in the 20th century? Do you think soft skill evaluation of employees is the latest management mantra? Will it come as a surprise that in India these were formed in 4th Century BC?
Kautilya’s Arthshastra, written in 4th century BC, lays down rigorous process for selection and background screening for ministers, priests and government employees. It is more extensive than that employed in the present-day corporate world. I am doing a comparison of the two below. After reading, tell me whether we have progressed or deteriorated in 25 centuries.
1. Selection Process
Let us first see the qualities senior level people require according to Kautilya:
“Native, born of high family, influential, well trained in arts, possessed of foresight, wise, of strong memory, bold, eloquent, skilful, intelligent, possessed of enthusiasm, dignity, and endurance, pure in character, affable, firm in loyal devotion, endowed with excellent conduct, strength, health and bravery, free from procrastination and fickle mindedness, affectionate, and free from such qualities as excite hatred and enmity–these are the qualifications of a ministerial officer (amátyasampat).”
If you look at them, he covers intelligence, professional capability, personal character, strategic thinking, emotional intelligence, social and business connections, soft skills and physical fitness. In the 21st century words and terminologies are different, but attributes are the same. Hence, not much change.
2. Background Verification Process
Now I am giving a table below comparing the two period’s process of background verification. For detailed methodology of the current period refer to my article – Pre-employment Background Verification.
Doesn’t it make you think? Over 25 centuries, the basic concept and process of selection and background verification has remained more or less the same. However, Kautilya’s selection process doesn’t stop here. He mentions a few additional processes and I am amazed at the insight.
3. Detailed Character Verification
In the Arthshastra, Kautilya asks to ascertain the character of employees by offering temptations and instigating them against the king. Senior level ministers and priests should attempt to lure the employee to test him for four allurements- religious, monetary, love and fear. He suggests creating situations to test whether the employee will defy the king for the sake of religion, money, sex or under threat. Then he states, that whosoever is lured by a certain aspect, should not be in-charge of it. For example, if someone fails the test of monetary allurement, he should not be responsible for managing finance. The tests were conducted to ensure that people in critical positions were incorruptible.
In present times, we select senior managers on various aspects but their loyalty and character aren’t as thoroughly checked as in the ancient times. In my view, quite a significant number will fail Kautilya’s tests for “purity of character”. How many CEOs check whether their direct reports will betray them for bribes and rewards?
Closing thoughts
In India, around 25% candidates submit false or inaccurate resumes. The background screening processes aren’t fully established in most of the organizations. With high risks of hiring terrorists, hackers and fraudsters the organizations are susceptible to financial, legal and reputation risks. Isn’t it surprising that even after 25 centuries the process and procedures aren’t fully implemented.
We now say we are living in a fast changing world. So, do you think background-screening processes will become efficient in this century, if they haven’t changed in 25 centuries?
We Indians jokingly refer arriving late for a meeting as arriving ISD (Indian Standard Time). However, if you, my reader, are an Indian, you would have heard a question from a western colleague – “Why are Indians late for meetings?” If you are a westerner, you desperately want to know the answer to bring your stress down and figure out whether the Indians actually want to do business with you. However, whether you are an Indian or a westerner, have you ever thought of Indian attitude to time as a strength in the future chaotic world?
Let me delve into a little bit of detail before I answer that. The attitude towards time divides people into two cultures – monochronic people and polychronic people. According to Wikipedia the definitions are:
Monochronic – A monochronic time system, people do things one at a time and segment time into precise, small units. Under this system, time is scheduled, arranged and managed.
Polychronic – In polychronic time system, people do several things simultaneously, and take a more fluid approach to scheduling time.
Indians follow the polychronic time system whereas most of the western countries believe in monochronic time systems. The general perception is that people following monochronic time system are better organized. Hence, monochronic system is superior.
1. Attributes of the two cultures
Below is a table of attributes the people of two cultures show with the current business buzzwords and applicability to Indians. Check it out and tell me whether Indians attitude towards time is going to be strength in future?
No
Monochronic People
Polychronic People
Buzzwords
Applicability to Indians
1
Do one thing at a time
Do many things at once
Single task v/s Multitasking
Multitasking
2
Concentrate on the job
Can be easily distracted and manage interruptions well
Advancement in technology and telecommunications has globally connected the world with little segregation possible in work and home life. Managers do multiple tasks now and Gen Y are mentally geared to do so from childhood.
Advantage – India: Indians traditionally do multiple tasks and have a huge population of Gen Y.
b) Effect of globalization
Globalization and outsourcing has ensured that managers are not physically available on site to monitor tasks. Secondly, work-life balance is encouraging more people to work from home. Hence, success depends on delivering results and not on completing tasks.
Advantage – India: Indians do not have mindset for process adherence and adopt flexible approaches to achieve targets.
3) Influence of social networking
In the age of social networking, communication is taking center stage. Senior managers face the challenge of communicating with a global workforce of different cultures.
Advantage - India: Indian communication style is subtle, layered and non-aggressive.
4) Demands due to complexity of business
The space of change in the world has increased due to technology and globalization. The business environment has become complex and chaotic. The long-term planning is not possible because parameters change in a short time.
Advantage – India: Indians managers are used to dealing with adversity and chaos. They are comfortable working delivering results with minimum infrastructure and support.
5) Finding meaning in relationships
The western organizations have realized that in the long run transactional relationships result in dysfunctional organization culture and reduce customer loyalty.
Advantage – India: Indians believe in long-term relationships even in business. They conduct business after establishing trust and respect in the relationship.
Closing thoughts
I do not know whether I am on the right track. Nevertheless, in my opinion we definitely need to relook, as the risks are high. For instance, presently the western organizations are developing their organization structure, processes and framework according to monochronic thinking. On the other hand, as the business environment requires polychronic behaviour, there is going to be clash in the system. Employees will be confused and unnecessary conflicts will occur. That results only in one thing – lower profits and higher risks.
In Indian organizations, we need to be clear that we do not adopt behavior patterns and change the culture according to our perceptions. We need data and analysis to assess the culture that will be suitable in future. It is possible, that a polychronic culture is better.
My last post on Indian Management Model generated a common comment – “India already has a management model where obedience to the boss comes first!” That is the common perception so I decided to delve deeper into the subject. Where did the authoritarian style of leadership come from in India?
The common perception of modern day CEO was that a CEO had all the answers. He was all knowing same as the prior period kings. In this century, the management mantra is that CEOs don’t have all the answers and should have the ability to ask the right questions. They need inputs from all to form decisions. Therefore, the shift clearly is towards participative leadership style.
After some research, I found that authoritarian leadership style originated from the Greek terminology “autocratic leadership”. My view is that Indian history is full of examples of participative leadership. Let me explain this viewpoint further.
In Ramayana, the main characters considered obedience a virtue. However, Buddha propagated the view – question everything, don’t take anything at face value. Subsequently Mahabharata is full of characters doing exactly as they please, breaking all the rules and getting into a lot of trouble. In it, Krishna asks Arujuna to fight his teacher Dronacharya, his elders, most of his relatives and friends since they were supporting unethical Dhurypdhana.
Further, Kautilya’s Arthshastra gives a full process for the king to take decisions after consulting his ministers, officials and public where required. He discussed participative leadership in 4th century BC. Surprised! Let me share his thoughts with you.
1. Discuss with ministers and employees
The king shall deliberate over matters with a number of people as required. It states that “No deliberation made by a single person will be successful; the nature of the work which a sovereign has to do is to be inferred from the consideration of both the visible and invisible causes.”
2. Obtain outside counsel
It further mentions that discussions should not be restricted to ministers and their direct reports. The king “shall sit at deliberation with persons of wide intellect.” Hence, it discusses the concept of consultation from people outside the ministry.
3. Encourage constructive confrontation
Next, the Arthshastra mentions that the king should hear all opinions even contrary to his. It states – “He shall despise none, but hear the opinions of all. A wise man shall make use of even a child’s sensible utterance.”
4. Selection of advisers
Then Arthshastra states that king should not select people on a random basis or those who have no clear idea of the execution of work required. It states -“He shall consult such persons as are believed to be capable of giving decisive opinion regarding those works about which he seeks for advice”. Hence, qualification and knowledge of advisers is a prerequisite.
5. Opinions of competitors
Kautilya does not suggest that advice should be sought from friends and allies alone. He states – “nor shall he (king) sit long at consultation with those whose parties he intends to hurt.” Hence, getting competitive information and viewpoints hasn’t been ruled out.
6. Number of advisers
Kautilya advises that in the normal course of business the king should discuss with 3-4 ministers. He states that discussing with one minister is useless, as he will advise “ willfully and without restraint”. Discussing with two would not help as “the king may be overpowered by their combined action, or imperiled by their mutual dissension”. Discussing with too many minsters will cause a great deal of trouble and slow down the process. I think Kautilya has adequately covered modern day challenges of selecting advisers.
7. Method of discussion
Last but not the least, Kautilya defines that the king should choose to hold a collective meeting or individual interactions depending on the situation. In his words – “The king may ask his ministers for their opinion either individually or collectively, and ascertain their ability by judging over the reasons they assign for their opinions.”
Closing thoughts
Kautiliya comprehensively covered most of the aspects of participative leadership in his Arthshastra. Authoritarian leadership appears a western concept and not an Indian concept as is commonly believed. The style took major hold during industrial revolution. With globalization and increasing complexity of business, participative leadership is gaining ground. Concepts of collective intelligence and crowd sourcing are garnering strength.
Moreover, the main concept of Hinduism is – everything that is created is destroyed and everything that is destroyed is recreated. If it is true, then history repeats itself. Then isn’t it better to understand the historic management concepts and learn from them.
Lastly, in the creation of new world order, nothing is sacrosanct. In words of Jalaluddin Rumi – Don’t be satisfied with stories, how things have gone with others. Unfold your own truth.
I am asking my readers - Have you heard about the Indian Management Model. If not, then why not? India has a rich history of baniyas (business community) who excelled in trade. India controlled one-third to one-fourth of the world wealth in the classical period (1AD to 1279 AD). So why do we not have Indian management principles?
Indian business schools and colleges teach management concepts formulated by Peter Drucker and Fredrick Taylor. Granted America had a dramatic and glorious history of business growth. However, presently the media headlines proclaim just one thing – American business environment sucks! Indians have made great strides in adopting the American money market principles but shouldn’t we stop and redefine them.
Indians managers may think it is not possible, but Bollywood has taught us it is possible. Yeah, Bollywood has chosen the best of both worlds. Aamir Khan’s Lagaan reached the Oscars with dirty dhoti clad Indians singing, dancing, and playing cricket. Even Danny Boyle’s Slumdog Millionaire had a song and dance sequence. Bollywood movies contain high-octane emotional drama, no-brainer jokes, head over heels in love stories, superman fight sequences, songs and dances. Bollywood adopted the Hollywood technology, marketing and financing strategy, and retained the cultural core of Indian cinema. It presented itself to the world in various award functions without attempting to incorporate Hollywood sensibilities and tastes. It is now so popular that even US dance reality shows have with Ballad and Hip Hop, Bollywood dance form.
We need to do the same with Indian management rather than blindly adopting western best practices. Below are some of my rather radical thoughts on how we can do it. Read it and tell me what you think.
1. Holistic Business
The stupendous success of American capitalism in 20th century resulted in making the money market model popular. India initially after independence followed socialistic model but after liberalization in 1990s is foraying into hard-core capitalism.
Now, after witnessing the pitfalls American business concept is undergoing change. More and more people are questioning the basic premise that business is for profit alone. People are propagating that business has responsibility to all its stakeholders – investors, customers, employees, suppliers and society. It cannot profit while harming the society.
From ancient times, India propagated the concepts of holistic business. The stories in Indian history repeat the same message. A businessman is required to conduct business ethically and responsibly and has to give back to the society. Unlike the west, Indian philosophy focuses on balanced life and not the concept that more is better.
Hence, while the west was struggling with high CEO salaries, until recently, India was not having this problem. The Indian CEOs salary increases have occurred in the last 6-7 years. While the western public is protesting against these high salaries, Indians are acquiring the bad habit. The Indian business leaders need to look what they are copying from the western world under the guise of management nuggets, best practices and benchmarks.
2. Non-violent Competition
Once a friend remarked – “You quote Mahatma Gandhi and profess to be a follower of non-violence principles, but you are always fighting”.
I responded – “When was Gandhi ji not fighting? He fought the British Empire for half his life. He just did it non-violently. He based his fight on humane principles and values.”
We need to introduce the concept of non-violent competition in the business world. The financial crises in the west showed that cut throat completion, aka dog eat dog world results in organizations with dysfunctional cultures. The banking regulators’ reports prove it.
Indian principles of non-violence (ahimsa) state – “do not harm anyone”. It does not say – “do not excel”. Indian business leaders must focus on achieving great heights based on knowledge, ideas, innovation and strategy. They must not focus on running down their competitors through industrial espionage, illegal acts or negative publicity.
The same applies to Indian employees. Excel on merit and not by creating misfortunes for your colleagues.
One thought to keep is – Non-violence and success aren’t two mutually exclusive terms.
3. Teach Ethics Through Indian Philosophy
When I started blogging, an American blogger gave me feedback on one of my articles – Buddhism in Corporate Life. He said that in US they don’t mix religion with business ethics. Though I understood his point, I couldn’t see how Indians could adopt it. In India, religion is entwined with Indian philosophy in every aspect of life. The values and attitudes of a country’s population define its culture. We cannot segregate business ethics from the whole piece and teach it in isolation.
The pujas, fasts and festivals of various religions of Indian sub-continent would account for 300 days in a year. There is a moral story behind the folk tales of numerous gods and goddesses. The western world is now talking about “storytelling” to give messages and sell concepts. The Indian mythology did just that. Then why not use it to educate on business ethics?
Let me put it another way. How many Indians would know the Utilitarian Approach of Jeremy Bentham and John Stuart Mill or the Rights Approach of Immanuel Kant? My guess is less than 5%.
Which ethics philosophy would be easier to sell to Indians? The one they are familiar with, and connect at emotional and psychological level.
Unfortunately, in India political parties create a ruckus whenever Indian concepts are included in the school course syllabus stating it is favouring some religious group. They don’t object to the introduction of western concepts. We need to stop being apologetic about Indian heritage and proudly learn from it.
4. Inclusive Workforce
The term “Diversity Management” sends one clear message – “You were not welcome and we are doing you a favour by inviting you”. It applies to women, LGBT group and minorities.
In the last few years, LGBT rights have taken centre stage in the western world. Let me touch a bit of Indian history. The British in 1862, introduced section 377 of Indian Penal Code prohibiting homosexual activity as British soldiers had sex in the ships travelling to India.
Before British rule, Indians accepted homosexuality without aversion. Homosexuals were not considered inferior or abnormal. In Hinduism context, every person has a masculine and feminine side and the percentages vary in each human. No one is completely male or female. Hence, some pictures depict gods in the conjoined half-male half-female form.
My guess after reading the Da Vinci code is that Christianity propagated the concept of women being inferior to men. Before the Moghul rule in India, Indian women enjoyed equal rights. Hindus pray to their gods along with their soul mates – Ram- Sita, Krishna- Radha, and Shiv-Parvati. Goddesses Durga, Lakshmi and Saraswati represent power, wealth and knowledge. Ramayana and Mahabharata, depict king Ravan and Dhuryodhan respectively, as evil for sexually harassing women.
Before the misrepresentation of caste system in India, a community was defined according to the nature of work they were doing. And not on basis of religious inferiority or superiority.
Hence, in India we need to go back to 1 AD to understand the concepts of inclusive society to develop standards for inclusive workforce.
5. Social Communities and Soft Skills
The American social concept is that an individual’s needs are superior over family and society needs. However, the Indian concept propagates superiority of family and society needs over personal needs. With nuclear families in the last twenty years, Indian society is transitioning towards American concept, thinking it is better.
Though if you read the latest American management mantras, they talk about:
a) Building relationships – Transactional relations do not work in the long run, hence the use and discard policy is losing ground. Indians work with business partners after building a relationship of trust and respect.
b) Collaboration and teamwork – Being able to work with teams is a key strength. Employees are rewarded for collaboration. Individual star performers no longer enjoy the prestige of the last decade. Indians work well in groups as they have numerous members in family to cater to and learn in childhood to meet different stakeholder interests.
c) Service leadership – Arrogance, over-confidence and extravert behavior in leaders is rewarded in America. However, now service leadership or level 5 leaders are valued. Indian leaders, be it Gandhi or Nehru, were known for their humility and service leadership.
Closing Thoughts
Indian civilization is one of the most ancient civilizations in the world with a very rich history. The Vedas, Arthshastras and various philosophical texts provide a vast reservoir of knowledge on life, business and society. Even Steve Jobs and Beatles got that. Indians needs to go back in time to understand those principles. While the west offers a lot of knowledge, it has been tested only for a century or so and fatal flaws are showing.
Adopting the western principles blindly is not the solution. One of the biggest risks is when a company copies or adopts something without evaluating the feasibility. It holds true for management models also. Choose the best of both worlds and devise a new management model suitable to India.
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
