Though the jury is still out on whether the recent incident of the Rs 300-crore fraud by a Citibank wealth manager, Shivraj Puri, was systemic or not, of late cases of employee infidelity are on the rise with India Inc. The bribes-for-loan scam involving officials of half a dozen government banks and LIC Housing Finance was again essentially a case of dishonest employees?involving some right at the top of the food chain?caught with their hands in the till. And the Citibank imbroglio has already done collateral damage at the Munjals-led Hero Group, with a CFO of a privately held group company behind bars for allegedly colluding with Citibank?s Puri in directing the Munjal family money into schemes pushed by Puri.
Though not as high profile as some of yesteryears? cases?remember Samsung Electronics? former IT division?s chief executive Vivek Prakash who was taken into custody for alleged siphoning off Rs 100 crore at the Korean chaebol or the mid-2000s case of a high flier CEO of a consumer expendables major fired for apparently stealing from the employees? provident fund?these cases nonetheless should be a wake-up call for corporate India, as willy nilly the impact of such employee misdemeanour will ultimately come back to haunt corporate reputations.
A year-old study on corporate fraud, Indian Fraud Survey Report 2010, by consulting and audit major KPMG pointed to this growing malaise, with over 75% of survey respondents saying that in the last two years there has been a rise in the incidence of fraud in corporate India, with around half reporting that they are witnessing more such cases within their organisations. The respondents here were senior managers (CXOs) of mid-to-big size Indian and foreign-owned companies across industries?consumer goods, IT, financial services, real estate, infrastructure et al.
What?s most alarming, and prescient looking back, is that the around three-fourths of respondents in the KPMG survey said that employees are the chief perpetrators of most frauds, barring those involving intellectual property. But unfortunately, even though companies recognise that ?the enemy within continues to pose the biggest threat?, the survey points that in just one in three cases did the organisation initiate legal action against the erring employee, with the majority of the cases investigated and dealt with internally. This may be a grave mistake that companies are making at their own peril.
Merely addressing it within the organisation, as the practice seems to be with most companies in India, according to the KPMG survey, may appear judicious at first go, but is really an opportunity lost to reiterate the sanctity it places on that ?trust? with all stakeholders. Because nothing gnaws at corporate reputations in a service-dominated economy like ours?where customers? finances and data from earnings, expenditure, savings, investments, telecom conversations to shopping habits are all accessible to even low operational-level employees?more than this breach of privilege by the very people who were supposed to be the custodians of it. For a Toyota may come out of a massive product recall of last year after all, but it was impossible for an Arthur Andersen to resurrect its business and reputation after the allegations, and initial conviction, of its people colluding with the infamous Enron in dressing up the now defunct energy major?s books.
In that sense, companies should treat their employees much like Caesar?s wife, seen to be completely above suspicion, and loudly and publicly disowned for any breach of trust.
?shailesh.dobhal@expressindia.com