The Telegraph
Since 1st March, 1999
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- The growth of corporate ethics

N.R. Narayana Murthy represents a new breed of middle-class (some even lower middle-class) Indians who in the last 20 years have used their brains and their enterprise to build fabulous businesses in their lifetimes. They not only brought ambition and commitment to their businesses. They brought a strong system of ethics and values and social responsibility. There are many like Narayana Murthy today, but he was without doubt the first to articulate these attributes.

We all know of businesses where the family patriarch continues at the top into old age. Restless children and others in the family wait for his departure. In some cases, they have even staged a coup and got the old man out. It is difficult to give up, especially when you founded the business yourself. Narayana Murthy handed over the running of the business to Nandan Nilekeni some years back and at 60, has stepped down as executive chairman. Other founders of the company, perhaps with better claims to succeed him, had stepped back to let Nilekeni take over, though he was much younger. This is a new culture for India when able people step down at a certain age and others step back in favour of someone they think is abler. We only need to look at our political leadership to see how uncommon this is.

Narayana Murthy’s greatest contribution to Indian industry is to have brought in a public discussion of ethics, a system of values and transparency in the functioning of his and other companies. Others have done this too, especially in his industry, but not as publicly and visibly.

In 1998, I helped organize and conduct one of the early conferences on corporate governance and ethics. Among the many top business people present, were Rahul Bajaj and Narayana Murthy. Bajaj said: “Adam Smith, I believe, was right in saying that we are all governed by our self-interest, our greed... You need a balance in life. We cannot just commercialize everything.” He went on to say: “If my son becomes the owner of Bajaj Auto and my ten rupees share which is today worth Rs 900 and our only wealth in the Bajaj family, if that Rs 900 or Rs 1,000 share declines to Rs 100, and my wealth of Rs 1,000 crores becomes Rs 100 crores, and even Rs 10 crores, no son of mine is going to make me accept that.”

A little later, Narayana Murthy focussed on the theme of corporate ethics and governance. He said that corporate governance is about fairness, transparency, understanding societal responsibilities, efficiency, effectiveness, “discharging one’s obligations and duties towards the government fully and totally”. He pointed to the sense of insecurity among corporate leaders at that time, their uncertainty about tomorrow, and therefore “they make sure to grab all that they can today, make sure that their child, grandchild, and so on, are all safe for the next ten generations...There is also the issue of greed. Somehow the Indian mindset says that it is better to have a larger share of a smaller and diminishing pie than a smaller share of a larger and growing pie... [U]nless we level with our shareholders, our employees, our customers, our Government, and level with society, there is no future for us. And that is the reason we (Infosys) formed our own set of rules” of governance.

He asked, what can we “do as the owners of these corporations'” First, he called for a change in mindsets: “[I]f we look for the public good, then the private good will automatically come. Second...we do not use corporate resources for private benefits.” Third, he said that ownership of a percentage of the company did not mean 100 per cent ownership. He asked for a long-term orientation by creating trust in all the constituencies, and that requires transparency. He also said: “There is a feeling in India, a mindset that says that Mr Narayana Murthy’s son has to become the Chairman and Managing Director of Infosys. That is absolutely ridiculous...(But) just by virtue of being my son, I don’t think he has a right to be the Chairman.”

Others have said similar things before him. Some have even done it. However, he is the first to have actually practised everything that he has said. He becomes a figure of iconic proportions because he has said and done all this while building a successful company, indeed an industry. He has delivered great rewards to everyone who made the journey with him. He has shown that ethics is good for business; so is good corporate governance.

In 2002, I was directing the advanced management programme for the All India Management Association. The course featured Sumantra Ghoshal as the prime faculty. Another important feature was a day that the managers spent with the Infosys top management and then in the evening made a presentation to them with suggestions for consideration. This had been the practice for some years. We were to have reached the Infosys campus by 10 am where the chairman was to start the briefing. With Bangalore ’s Hosur Road being very unreliable in traffic flow, we were 45 minutes late.

Narayana Murthy met us at the door and took us in to the conference room. We made our apologies. He said nothing, made his presentation, and then the managers went to meet the other top management. We met the chairman again over lunch. At no time did he say a word about our lateness. In the afternoon, the team left for the programme venue to prepare for the evening meeting. One manager said to me, “How can these people be effective' They are too nice!” I thought this was a comment worth exploring and conveyed the comment to Nilekani, who, I think, was about to become the managing director. He said — and the words are not an exact quote — We are courteous and considerate. We take pains in our recruitment. We put a lot of effort into the induction and training of new entrants. If someone is not a good fit into the task assigned to him, we move him around and give him other opportunities. However, at the end of the day, if he does not perform for the company within a given time, we let him go.

Not knowing him well, perhaps “nice but tough” might be the words you could use about Narayana Murthy and his colleagues. However, his company has lived up to it, considering their lower levels of attrition. Many Indians think that the two do not go together; that our toughness demands loud voices, rudeness, sarcasm, unreason. It was a useful lesson that the managers got out of the programme.

Another area where Narayana Murthy has set an example to the newly wealthy promoters of businesses is in corporate and personal philanthropy. Infosys and its promoters have given generously for urban governance in Bangalore, sanitation and education, and so on. Tata and Azim Premji of Wipro have self-effacingly given generously from their profits in organized philanthropy for years but we hear little about what their generosity has achieved. Infosys and others have followed them and are well-known for their philonthropy.

Narayana Murthy has also shown that it is right for people to speak out without fear, on issues of national importance like reservations in higher education, the abysmal quality of Indian education, the neglect of infrastructure in Bangalore, and so on. In each case, he has also tried to do something about the problem while prodding governments to do their job.

The great thing about today’s open economy, where government cannot stop your licence or deny you resources or have you raided for trumped up offences, is that you can speak out. That requires a clear conscience. Narayana Murthy has blazed a trail that many others will follow. We must now wait to see what this remarkable man will do as he turns sixty.

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