Business Code of Ethics

Being Ethical

Being ethical and a businessman are altogether paradoxical. Business is synonymous to growth, only an opportunist person can lead the entire organisation for the fulfillment of the single point objective, boosting up revenue. This is altogether a non-criminal act of prudent business management that may not necessarily be absolutely ethical. When business competitors leave no stone unturned for ensuring each others failure expecting ethical practices is abnormal.

Personally I am a big fan of Ratan Tata, the former head of the oldest and largest business empire in India, the Tata Group. The elite list in fact a minuscule archive of gentleman- businessman that I personally adore and admire. Be that be Narayan Murthy of Infy or Mr.Bose, the name i.e. identical to unparalleled acoustic products. Well I never proclaimed, the business practices followed by these organisation just mentioned are completely principled or these gentlemen are completely unaware of the major unethical doings in their respective organisations. However, these honorable men primarily focus on delivering quality products and services rather than making profit. In this highly competitive business context unless you have an edge over others you are certain for purging when competitors resort to all possible methods (including the ones not in copy book). So the sum and substance of this thesis is either you be an ordinary businessman or an extraordinary one who not only professes ethics but also possesses some unordinary big ideas that put you in the lead.

Coincidentally, when I last appeared for my CFA exam, I had a spirited read through of the code of ethics section. The core of the stream entirely focus on the said subject and the ever intriguing questionnaire are aimed at reviewing the potential of a candidates understanding of the topic when applied in real life business. The ethics are so crystal clear on quite complex areas of operations that it can smell a rat in a usual looking business deal. The humor is, a stalwart student of the same stream, Rajat Gupta defied all the ethics in the lust for making more money. ‘Insider Trading’ may be a strange term in India but its quite common in USA with several monumental convictions. One principle that rules the business world is ‘make money’, money prevails over all ethics. Why just business, money controls the whole world as the only universally spoken language.

Now if somebody claims Mr.Ambani is corrupt (that principally everybody agrees), but the charges may not be legally tenable. The case may be rejected by the court on the very ground of common jurisprudence. Everything is right as long as that’s not criminal and there is no place for ethics as long as that generates good money. However, here lies the main difference between an ordinary businessman and an extraordinary one. Till you promote an ordinary idea and commercialise to earn profit, you are bound to employ corrupt mindset for survival and growth. In contrast, an extraordinary idea sells itself with clear cut advantage over others in competition.

The Big Idea

Lets understand one more theorem, both in private and public sector the ordinary staffs are mostly corrupt or unethical at least in the matter of promotions as compared to the actual talented ones. The talented lot repose their faith in their own skills for growth so need not to adhere to any lowly or unethical method. The ordinary here implies both the IQ aspect and lethargic attitude. Desire for money would always be there but the dearth of big ideas and talent always gives space to unethical actions. Google, Facebook or Apple are the best examples, how big ideas can make really big money not necessarily being unethical.

Money Sleeps For Ever!!!

 “Greed is good” ~ Wall Street. Three words that are arguably the finest epitaph for the era of excess that began in the 1980s, excessive greed compounded even further and finally culminated in the most serious economic crisis in 2008 impairing the whole economy. “Madness is badness of spirit, when one seeks profit from all sources” – Aristotle. We have the new nomenclature as coined famously by British media “Casino Banking” quite evidently instrumental for high growth across business verticals, multiplying money over a century now. Greed probably closely echoes the inherent driving spirit of the industry. However the exposure is now unlimited and stakes are quite high, financial crisis are driving the economy to nothing but a double deep recession. The unraveling facts yet to appear in public domain might potentially bring in new surprises in the crises laden economy.

“How much is enough” ~Money Never Sleeps, sums up the important message to the underlying problem. After the Financial crisis of 2008, there was a hue and cry all over the globe about the functioning, administration and regulation of Financial Institutes. The most impacted are the banks which as per me form the most regulated sector in the industry. In an industry where a bank operates with a capital of 2% to manage £1 trillion asset/public money this becomes more imperative to censure the fooling around in the way of making money. We all have heard about the BASELIII, ICB, Dodd-Frank, SOX compliance, various stress tests and other global and local regulations coming into force like never before. Another result was a fire sale of assets to boost balance sheets. The banks were desperate to raise capital and shrink their balance sheets, often under orders from regulators. Banks now need to assess the impact of revised regime and their ability to track leverage ratio (exposure/capital), liquidity coverage ratio, large exposures, regulatory capital, risk management etc.

To add to Bankers woes, ICB now has brought in the reforms to ring-fence retail banking operations from their “casino” investment banking business. Capital ratios requirements are further raised. There is a tremendous pressure on banks by banking supervisors, central banks and finance ministries. The tighter the regulatory framework, the more likely the rules will be different from country to country, which would drastically raise the fixed costs of an international strategy, given that a number of the big players are global. These regulations are further viewed as obstacle to cross-border mergers and acquisitions by certain market participants.

The tight regulations still cannot compensate for inadequate supervision by regulators and poor decisions and rogue trades by bankers. We are in a global market and tight local regulations would mean there is no level playing field in cross border sectors/operations. Having said this, I completely endorse the BASEL III norms and banks across the globe should adopt and adhere to these guidelines, sooner the better .In a way, there would be a single set of regulations for all competitive entities. Regulators must understand that too many, or too complex rules are completely unnecessary and unwanted. By prescribing overdose of sleeping peel the regulators might be scripting for Hollywood sequel to Michael Douglas starrer  ‘Money Sleeps For Ever’. Nevertheless, these steps underscore the intention behind and the coherent message in order to build a robust industry. To conclude my view is to find the right balance to enhance the efficiency of a Bank, ensuring accountability and effectiveness of banking sector as a whole.

 

Co-Authored by Kartar Singh Parmar, written almost 18 months ago on the contemporary conditions in banking sector.

Invest In The Right Earnest

Right Investment

Currency as a medium of exchange may go well beyond its popular definition of notes and coins. The bullion and real estate are best investment avenues as per conventional perception besides casino banking products. But so far as the the literal meaning is concerned all possible mediums of exchanges are currencies. As per economics, the intrinsic value of any currency always depreciates if not invested properly.

Nevertheless, right investment always protects the future. The technology itself, a high denomination currency if not invested timely, could secure legends to fall. The pioneers of the respective product segments Nokia and Kodak are already case studies in business schools. Mere reluctance to adopt right technology on time could engineer dramatic change in market dynamics. Besides, investment in research (not limited to technology) is key to sustained growth and a secured future.

Time is most important form of abstract currency because “Time is money” 🙂 . Available in abundance with both rich and poor, in the most equitable manner. If utilised properly, could flip the demographic equations altogether. History is witness of many legendary falls and dramatic rises, in all the cases the reason responsible for the said rise and fall is simply efficient investment of currencies in hand.

Your children are most important human currencies, right nourishing with good education would always be a good investment for future. The definition can be extended to technical as well as soft skills, investment in skill development never goes in vein. Public contact in general is a high net worth asset, in this age of recommendation your contact could buy things that conventional currency would fail to do.

Nonetheless, Invest in the right earnest is key for survival and a brighter future. So act before it’s too late and it’s better late than never. 🙂