Family first: Lakshmi Mittal and son, Aditya Mittal

If you take a look at some international measures of corruption, India figures in the nether regions. In the Transparency International Corruption Perceptions Index, 2006, India is at no. 70, along with eight other countries. In the Bribe Payers’ Index, it is last among the 30 exporting countries rated.

One must, of course, allow for the holier-than-thou attitude of the West (all these surveys are generated from such countries). To give just one example, the UK , which is at no. 6, has just dropped an inquiry into the Al Yamamah deal between BAE Systems and the Saudi government. The official reason: “The need to safeguard national and international security”.

For the western world, hypocrisy begins at home. But while one needs to take their pious pontification with a pinch of salt, Indian companies do need to look at their ethical standards as they go global. True, there are shortcomings. But the worst thing one can do is throw out the baby with the bathwater and blindly adopt the mores of the West.

Take just one aspect. The US is a very litigious society. It is perfectly normal for companies to sue each other and then sit down and behave like a happy family. In India, recourse to the law is a last resort. You don’t shake hands and make friends after that. US companies have blundered in and just can’t figure out why they are treated as pariahs by their former partners.

This is also true of their misadventures in China. MNCs often complain that the Chinese don’t do business on a level footing. They believe in personal connections (guanxi) and ‘face’ or respect (mianzi). Unless you master these arts, you will never make it in China .

The truth is rather different. Guanxi is just a matter of developing trust. Once you are accepted by the Chinese, they will go out of their way to help you. And mianzi matters everywhere. An Indian chamber team recently went on a sozzled tour of the country. After the initial meeting with their Chinese counterparts, the top people from the Chinese side refused to have anything more to do with the delegation. Low-level executives did the interacting afterwards. The Chinese had lost face. They were making sure the Indians did so too.

Indian — and Asian — corporate culture is rooted in the family. It is fashionable to talk about professional management as though it were always the desired end. But the opposite of professional is not unprofessional. Family-run concerns are not unethical; they just march to a different drum. Sometimes it makes much better music.

Indian companies have always believed in employing more than one member of the same family. They have taken this practice abroad too. In Orind Refractories in China there are several Mishras. They are professionals in the sense that none of them has any stake in the company.

In the West, this would have been regarded as a recipe for disaster. The family could help each other in taking the company and its shareholders for a ride. Yet, today, when there is an acute skill shortage in areas such as IT, US companies are actively encouraging employees to bring on board their wives, brothers and other relatives. The philosophy has changed because of the environment. It is now thought that the members of the same family will watch over each other because, if one strays, others will be affected.

Corporate ethics is a huge subject. It is of growing importance today because of India ’s increasing influence on international business practices (see chart). You may not survive if you take Gandhi’s lessons to the boardroom. But you will equally not survive if you adopt the Gospel according to Enron.

GROWING INFLUENCE

Impact of region on the evolution of international business practices (%)

Non-Japan Asia 72
US 64
Western Europe 33
Japan 26

WITHIN ASIA
Greater China 89
India 73
Japan 39
ASEAN 37

Source: Korn/Ferry International survey of 300 C-level executives with primary responsibility for or familiarity with their company’s operations in Asia