Compliance Q&A with Anwar Hashmi

Anwar Hashmi is a Senior Consultant within Global Ethics & Compliance at Integrity Leadership Partners, LLC  in the Washington DC Metro Area. He has over 14 years of experience in designing, developing, and implementing Global Ethics Programs at Tata Steel, a global Fortune 500 company and Tata Group’s flagship company. Hashmi has been associated with the Business Ethics Program of the company since the Tata Group developed its first Code of Ethics in 1998. While at Tata Steel, Hashmi was actively engaged in the institutionalization of the Global Ethics Program through training and sensitization as well as development and implementation of an ethics system and policies. He also initiated a process of benchmarking the Ethics Program among the world’s top multinational companies. Following the UK Bribery Act’s enactment in 2010, Hashmi launched an initiative to raise awareness amongst Tata Group Companies. The combination of these efforts contributed to Tata Steel being named as one of the World’s 100 Most Ethical Companies by the Ethisphere Institute.

CIPE’s Stephanie Bandyk discusses with Hashmi the factors that led to Tata Steel formalizing the firm’s unwritten code of ethics. Hashmi also discusses what motivated other emerging market companies to follow Tata’s lead.

• Corporate compliance and ethics programs are still not universally common around the world. In your experience, what are some of the factors behind companies in emerging and frontier markets recognizing the need for such programs and then taking concrete steps to implement them?

I can speak about the Tata Group. Codes of Ethics and Corporate Ethics Programs were not well-known subjects amongst Indian corporations. Tata Group had a long legacy of promoting ethical business conduct, which was like an unwritten code for the Group and religiously followed. Prior to 1990, the Indian economy was closed and there was not much competition, with companies operating in a protected environment. Price was determined by government agencies, so selling your product was not an issue. Then, with globalization and the opening of the Indian economy, which led to unprecedented growth of the Group both domestically and internationally, there was a felt need for codifying the values and business conduct to create value-synergy amongst the varied Group companies operating in different regions. A written document could give guidelines on the mode of Business and Personal conduct for the Group companies and employees.  The Western experience on this was used as a best practice and the Group developed its first Code of Ethics in 1998. We benchmarked the Code with the top Global Corporations Code. Since I was involved in the designing and development of the Code, I still remember how we gathered codes of ethics of U.S. companies like Martin Marietta and many others to use as a standard. With the development of the Code, the Group felt the need for an implementation program that could be applied uniformly across the Group. The implementation program was developed and became known as Management of Business Ethics (MBE).

• What’s motivated other companies to develop similar programs?

Tata Group was the first to develop a formal Code of Conduct. With the opening of the Indian economy, other Indian companies also started looking for business opportunities globally, especially within Western markets, and searched for association or joint partnerships with the U.S. and other developed countries. Such ethics programs are a requirement of doing business in Western or similar markets – companies need to have articulated values and a defined code of ethics. This led to other Indian companies developing a Code of Conduct and a structure to implement it. In fact, Tata’s experience was used as a benchmark by most of the Indian companies. I was personally called upon by several companies, in both the public and private sectors and other agencies, to help them develop a code of ethics.

• You helped develop the Business Ethics program of Tata Steel in 1998, the first such program in India. Tata Steel has since been recognized among the World’s 100 Most Ethical companies by the Ethisphere Institute. Tell us more about why and how the company embarked on this transformative path.

As per the Group Guidelines, the Tata Steel Board adopted the Tata Code of Conduct (TCOC) and a Corporate Ethics Office was constituted. As we started conducting training for the employees and other partners (vendors, associate companies) we found that there was a need for developing systems and procedures for the Code’s implementation which would act as a guideline for employees and other stakeholders in their business transactions. We then developed the Gift Policy, Whistleblower Policy, and later on, the Conflict of Interest Policy (all first of their kind in India). We also engaged with other corporate functions like security, human resources, procurement, project, and identified an action plan for Code implementation in all these functions. It was at this juncture that we decided to participate in the World’s Most Ethical (WME) Companies assessment program conducted by Ethisphere Institute in 2011. When we started preparing the answers to the evaluation questionnaire, we were pleasantly surprised that we had already taken positive action on the issues covered in the questionnaire. We were very delighted to see that we won the WME Award for 2012. We then decided to replicate the same for 2013 and received the award again.

Overall, the entire team of Tata Steel worked seamlessly and in synergy to achieve the award. The Group has a philosophy that goes to the bottom line with a perspective that business must act responsibly – complying with the law and promoting good governance. There was a zero tolerance policy towards corruption and bribery, any such action within the Group was deemed a corporate crime.

• Noting your work raising awareness for the UK Bribery Act at Tata Group, have you seen national and international regulation as a particular driving force in the creation of compliance programs?

At first some questioned the applicability of the UK Bribery Act to Indian corporations. When enacted in 2010, I organized a one-day workshop for the senior leaders of the company to explain the provision of the Act, which includes severe action against companies for giving bribes. After the presentations, I explained that because Indian companies have a presence in the UK – and now the US and other markets – the law is therefore applicable. The UK Bribery Act thus sparked and incentivized a Code of Ethics and formal ethics programs for many companies.

• How important is ethical leadership in making a transition to clean enterprise? And what does it mean exactly?
  

Tone at the top is extremely important and, in fact, vital to the success of corporate ethics programs. Leaders must show by example, otherwise the rest of a company will get a confused message. Ethics cannot be cosmetic, leadership must therefore act in a manner that is compatible with their Corporate Values and Code Of Ethics. Tata Group has a strong ethical heritage as a result of which leadership is committed to the highest standards of ethical business practices, which enabled us to institutionalize the business ethics across the group. However, for companies where the leadership is not committed to business integrity, you cannot embed an ethical culture.

For example, when first developing the gift policy at the Company – putting a cap on the value of gifts – the CEO took time in signing. The delay in signing the policy was due to the fact that he first wanted to confirm that he himself had not received any gift higher than the value of gift which was going to be mentioned in the policy, an example of an ethical leadership model.

• Compliance and ethics programs are sometimes perceived as “Western” solutions that do not fully apply in other parts of the world. How do you respond to arguments that the applicability of corporate ethics programs is somehow geographically or culturally bound?

I do not subscribe to this view. Values and ethics are universal principles, independent of geography.

Whistleblowing, for example, was considered a Western concept. The idea of anonymously reporting complaints was counter to a deep-rooted Indian belief that a reporter must have the courage to identify him/herself, though in the West, anonymous reporting has long been accepted. In one example from a group company that did not have an anonymous reporting system in place, an employee reported a major financial wrongdoing by a senior manager of the company, under a pseudonym. Because the pseudonym did not match any current employee records, the report was not noted and a major financial scandal took place. The episode ultimately proved that anonymous reporting should be taken into consideration. This resulted in policy change and now anonymous complaints are investigated and action is taken in response to them.

Those who say that the Western model of business ethics will not be applicable in Eastern culture, in my view, are trying to rationalize perpetuation of their own traditional privileges and controls which go against the fundamental principles of integrity and transparency. As an illustration, I recall the challenges I faced in trying to get buy-in of the first Corporate Gift Policy of India from one senior executive. When I asked for his views on Corporate Gift Policy, he reacted sharply saying some in the business/trading class in India consider refusal of their gift to be a discourteous action and the refusal would harm the business interests of the company. I later found out that he was in the habit of soliciting expensive gifts from business partners. He viewed the Gift Policy as a potential threat to his gift-taking habit.

The same holds true for the Conflict of Interest Policy. I noticed that some executives were taking business decisions in respect of their relatives, son, son-in-law, spouse, etc, Such people perceived the Conflict of Interest Policy as a curtailment of these privileges. These privileged groups would then criticize the Conflict of Interest as a Western concept not suitable for Eastern societies. While the fact was that the overwhelming majority of employees welcomed these policies as they hoped that implementation of these policies would regulate/stop the corrupt behavior of privileged few.

• One issue faced by many companies that consider introducing codes of ethics and corporate ethics programs is making the business case for it. How do you make the case, especially for firms in developing markets?

Ethics has a strong business case. The Tata case itself is evidence that conducting business with integrity leads to sustained business growth. The ethical branding of the company helped in transforming a basically domestic group into an international conglomerate.

Stephanie Bandyk is a Program Assistant in Global Programs at CIPE.