18 January,2009 06:49 AM IST | | Nik Gowing
A stock trader reacts to the fall in the stock market after the Satyam Computer Services scandal broke out. PIC/AFP PHOTO Pal PILLAI
Everybody is waiting and watching for the next corporate scandal to erupt
SUDDENLY the corporate rot is no longer just on Wall Street. The belief in deception and unlawful manipulation as an accepted way to ensure a business survives has a far broader base.
But how far does the corporate culture extend?
There is now widespread fear and suspicion. Where next will stones be lifted to reveal a nest of corporate lice and vermin eating away at the heart of companies that have long been almost revered as pioneering icons in their field?
The implications of the confession from Ramalinga Raju that he manipulated the books of Satyam Computer Services and invented cash assets it never had continue to shock.
What is the business mindset that means a self-made entrepreneur like Raju or some senior corporate
executives believe the only way to maintain success is through deceit, including misleading auditors?
Risk is a core element of any commercial venture. It starts the moment an idea is turned into a business proposal, whether starting up a small store in a village or building a new global concept of outsourcing.
In any market for any product, customers invariably have the last say. By deciding whether or not to buy, they will always be the arbiter of whether a business idea flies or flops. That is the long cherished nature of the market system. Many prosper, but many also fail. That is free enterprise.
What we are discovering now is the nature of a business frontier that has been rarely exposed until the past few months.
It is where the admirable instincts of taking risk and backing hopefully shrewd calculations about a market's future turn into a need to resort to deception and even criminality to survive.
Worse still is the conspiracy to circumvent the regulatory authorities, whose limits and weaknesses are well known.
Those business icons who circulated with often high profile celebrity status as paragons of success and good practice are suddenly exposed as something much darker and more sinister.
One can be generous and pay tribute to the brilliance and skills that generated such new and flourishing businesses in the first place. They were all core elements of economic growth whose direction was only upwards. And some are defying the recession successfully.
But success tends to mean that few people dig deeper and ask the sinister questions. If everything looks so good, why suspect a darker side to how it has been achieved?
Now investors and analysts wonder what and who to believe. Are annual reports and audits worth nothing because they are constructed as much to cover up as to reveal?
At least Raju pre-empted disaster by deciding himself to come clean about his manipulation and deception at Satyam. That cannot be said of many corporations where we now know that in the boardroom and at the highest executive levels there was active denial about the scale of corporate unravelling that loomed.
In recent weeks, chance social meetings with corporate executives have invariably turned to mini brainstorming on why the principles of business are in such crisis.
Over wine or canapu00e9s they have painted a picture of how within companies of all sizes there has been a spirit of never questioning anything that makes money. This is even if legal officials or those involved in scrutiny and compliance quietly raised questions and challenged principles.
One consultant even described to me how voices who wanted to raise legitimate cautions in the boardroom are often marginalised, humiliated to shut them up, or eased out completely.
Some chairmen and chief executives can be tyrannical towards those who try to exercise their duty to question. The obligations of oversight and ensuring best practice had to be subordinated to the expectations of shareholders that there will be profits, however they are made.
Now, bit by bit, boardroom realities that once ensured success are being exposed. Foremost among them is that many at the highest levels who were skilled at creating success are ill-prepared and not equipped to manage adversity when it looms.
Indeed, where are the future executives who will turn round companies and thinking for what lies ahead? After all, those already there have in some way been part of the culture that created the corporate crises which now has to be overcome.
In recent weeks, US President-elect Barrack Obama has used brutal language to describe the corporate culture of grab and greed that he says is largely to blame for America's spectacular economic implosion. He plans to confront and re-tool in a radical way the financial structures that have been abused.
But how can he re-tool and recalibrate executive minds whose very success was based on a certain way of flawed thinking that is now so out of step with the systemic revolution needed?
It is a thinking which believes their time will return again. After the current crisis when the world economy picks up, there will be new cunning ways to smartly circumvent whatever 'safeguards' are put in place. As the chat over wine and canapu00e9s also confirms, risk taking and imaginative thinking will be back in vogue.
While Barack Obama prepared to make his historic train ride into Washington yesterday (Saturday 17th), President Bush used his final official speech on Thursday to say that the "resilience of America's free enterprise system" will reassert itself.
But what kind of new resilience will it be? How much can the spirit of smart products and risk taking that brought such wealth be restored when the resilience that Bush praised was based on a business morality now condemned by the new US President?
The way in which this vital circle of corporate rectitude will be squared is far from clear.
But re-energising the world economy and restoring confidence will depend on it.
World News Today with Nik Gowing is on BBC World News from Monday to Friday at 2130 Hrs
