Tag Archive | India’s top auditor

Managers Told To Learn From Fall Of East India Co. – By Mukesh Jhangiani

                                                                                                 March 18, 2011

Managers Told To Learn From Fall Of East India Co.

East India House in Leadenhall Street was the ...

East India Company’s original headquarters on Leadenhall Street in London (Photo: Wikipedia)

By Mukesh Jhangiani
United News of India

New Delhi (UNI) – Indian business managers have been cautioned against the cancers of greed and corruption that had triggered the collapse of a forerunner of the modern corporation– East India Company.

The advice-cum-warning came from India’s top auditor at a convocation of Gurgaon-based Management Development Institute for 527 management students and researchers.

“What this country cannot risk is the deficit of ‘ethics’ in its corporates,” Comptroller and Auditor General Vinod Rai underscored, pointing out that “deficit in governance” does not apply “to government alone. It applies equally to the business community.
“No business can be sustainable in the long run and have a consistent growth trajectory, unless it is based on an edifice of credibility and integrity,” Mr Rai said.
The CAG’s remarks came last evening as a globalising India grapples with the need to encourage businesses on one hand and make them accountable to consumers, employees, investors and society, on the other.
Inept auditing, endless litigations, lax enforcement of laws marked by a virtual absence of any real punitive devices are among factors encouraging malpractices and driving up the cost of doing business.
The Auditor General who keeps track of irregularities in public spending recounted the instance of Satyam which, he said, symbolised a single word barrier to credibility !
Rai saw Satyam as the “one word” which “stood between our successful growth story and the credibility of our institutions.”
He recalled how “the story breaking in January 2009 created ripples in global economies about the quality of corporate governance, efficacy of regulatory bodies and probity in corporates.”
Rai’s 1500-odd-word convocation address did not dwell on the inadequacy of Indian regulation system exposed, critics say, as scam after scam involving business and other segments comes to light.
MDI Director V K Gupta, reached afterwards for comment, stressed the need for accountability, but did not see it happening right away.

East India Company (video game)

East India Company – now a video game (Photo: Wikipedia)

“Public opinion is going to play a role in India and the pressure will keep mounting unless the government takes heed,” said Prof Gupta, who teaches Human Resource and Management.
He said the Bihar election showed that what people want is development and clean administration, free of corruption.
Nevertheless, he said, “it may be another decade before accountability systems are put in place and function.”
The CAG noted businesses’ tendency to cut corners or take short cuts, but asserted that “any innovative enterprise which attempts to establish rapid growth with a lack of ethics is bound to fail in the long run.”
“Realise,” Mr Rai told new graduates, “that as managers and chief executives, you would be sitting in glass houses. Every action of yours would be carefully watched and recorded… it is essential for you to ensure that you will abjure unethical methods.
“The post reform period has witnessed a corporate culture of diluting or ignoring stringent ethical standards. It is often considered ethical as long as a corporate establishment, in its business practices, remains within legal confines to survive in business and beat the competition.
“This is misplaced corporate governance. Probity in business is as important a trait in an outstanding CEO as is to be articulate, positive, courageous, dynamic and professionally competent.
“You have to be a developer of talent and maintain cultural sensitivity. The culture to perform has to be deeply inculcated. Without meritocracy, you fall into the morass of nepotism and mediocrity.”
In this context, Mr Rai reminded students of the fate that befell the East India Company, “with which we are all familiar.”
Founded in 1600 and often believed to be the forerunner of the modern multinational, the company started as a humble trader in Asian spices and was soon managing Britain’s Indian empire.
“Today, there is no sign, not even a plaque in any building or location in London announcing the existence of the world’s one time most powerful corporation.
“What brought about the demise of this powerful company in an era which was otherwise promoting globalisation?
“The company’s legacy provides compelling lessons on how to ensure accountability and probity of today’s global business. The most fundamental challenge that all Institutions face is to ensure that employees promote the collective rather than their individual self interest.
“Private trading by its managers, became one of the cancers that gnawed at the company’s ethical fibre.
“Taking ‘presents’ to secure business became common place. These ‘presents’ influenced the quality and cost of the commodities traded. The cancer erupted into intrigue, corruption and speculation leading to its tragic decline and its non existence today.
“History has repeated itself with Barrings Bank, Bears Stearns, Lehman brothers, Fannie Mae and Freddie Mac – personal greed versus corporate interest. You need to deliberate on this and ensure that such temptations do not befall you.”
UNI MJ NK 1944