COVER STORY The Organisational DNA The Structure of Ethics Despite myriad challenges, companies are proactively combating fraud and developing a culture of ethics at workplace Issue Date - 01/03/2013 |
 SFIO, the investigation wing of the Indian government’s Corporate Affairs Ministry, recently ordered the high-level probe into alleged fraud by 83 companies in the last four years. The companies in the dock include Reebok India, Vaishnavi Corporate Communications, Satyam Computer Services, Ambuja Cements, Ultratech Cement, ACC and Sesa Goa.Business ethics and whistle-blowing It is a widely recognised fact that efficient corporate governance is rooted in the ethical behaviour of the top leadership in the organisation. One of the important ways of introducing a culture of ethics and values is a whistle blower policy. The Securities and Exchange Board of India (SEBI) mandates a whistleblowing mechanism in Clause 49 of the Listing Agreement that deals with corporate governance norms. In effect since 2003, however, it has not been as helpful as desired. The Public Interest Disclosure Bill, 2010, has further augmented the awareness about whistleblowing activities and the need to provide adequate protection to whistleblowers. But, there is still a lot of work to be done to prevent or detect the increasing cases of corporate fraud. A report by Singapore Press Holdings Limited reveals that almost half of the Asia-Pacific companies are confident of their internal fraud controls. However, according to a report by PriceWaterhouse Coopers, only 16 per cent of economic crimes in the region are detected by risk-management systems. The vast majority of incidences of economic crime, says the report, are detected by accident, tip-off, internal and external audit. Ethics in selection and recruitment Ethics play a central role in the recruiting and selection process. Since the workplace is a melting pot of different characters and cultures, it is the ethics of an employee that help in safeguarding the integrity of the workplace. “Expectations of ethical behaviour are typically communicated to employees through a code of conduct, policy, training, and the role model behaviour of top management,” writes Saiyadain in his book Human Resource Management, 3e. He believes that the HR management should be the starting point of the ethical programme. Recruitment and selection requires meticulous decision-making and judgement to ensure that risks of corruption, nepotism and other unethical practices are reduced to bare minimum. The team of recruiters must be equipped with a wide range of tools and resources to take critical decisions. “The processes of recruitment and selection need to follow ethical parameters as well as robust sampling procedures,” writes Charlotte McDaniel in his book Organisational Ethics: Research and Ethical Environments. |
 The Way ForwardKPMG India Fraud Survey 2012 notes that corporate India’s unwillingness to see fraud as a strategic risk poses a grave threat to enterprises as they start experiencing frauds of the future. Cyber crime, intellectual property fraud, and identity theft are rated as the top fraud concerns for future in the survey, underlining a remarkable shift as fraudsters now increasingly target organisational knowledge and not physical assets. “A one-size-fits-all framework cannot help mitigate emerging fraud risks. This is because each risk manifests itself uniquely. Companies need to be aware of the various possible modus operandi, perpetrators and gaps in internal controls. Only then can they develop an effective risk mitigation framework,” said Rohit Mahajan, Partner and co-Head, Forensic Services, KPMG India. The report suggests setting a clear policy on information assets, conducting regular training programmes, having an incident response plan, and setting up a separate specialist team with prior experience of handling frauds. |
