In his 2008 book Go Kiss the World Subroto Bagchi, co-founder of MindTree, writes about an incident in the early days of setting up the company. A group of IT professionals arrived at the office and asked to meet him. Thinking they were potential investors, Bagchi met them and dutifully answered detailed questions about the company. Once they were through, they informed Bagchi that they were ready to come on board — as employees. Many of them stayed with the company for years, rising to senior positions thereafter.
When Rupert Murdoch’s News Corp bought the respected Wall Street Journal in 2007, the journalists’ union protested strongly, pointing to his group’s questionable journalistic values. Several senior journalists left after the buyout.
Both groups of employees were unusual in that they cared about the reputation of the organisations for which they worked. Today, neither group must regret the decisions they took then. Like most IT companies in today’s business environment MindTree may be under pressure, especially after the departure of one of its co-founders, but it is still respectable and growing. Most importantly, it is also extant.
Contrast this with racehorse Satyam which flamed out on the back of a spectacular fraud by its founder, leaving its 50,000 employees floundering. Olympus’ employees around the world (including India) must experience that same sinking feeling as details of long-running accounting shenanigans unravel at the Japanese major which once enjoyed an Olympian reputation.
As for the Journal, those who left must feel vindicated. The recent closure of News Corp’s UK tabloid News of the World following a long-running phone-tapping scandal and the more recent revelations of a circulation scam in the Journal’s European edition suggest that the protesters were spot-on in their objections to Murdoch’s ownership.
Most rank-and-file employees don’t bother too much about the antecedents and practices of their employers so long as their pay cheques arrive on time and they aren’t unduly harassed or ill-treated. But the series of scandals that have been assailing the corporate world with alarming frequency in the noughties, many of them resulting in spectacular meltdowns, suggest that the time may have come for the advent of a more activist employee.
This is not, as the label may suggest, a union-style confrontationist negotiator, nor even the righteous whistle-blower, but an employee who stays well informed of, and constantly questions, his or her company’s business practices. Or, to paraphrase a financial services stricture, know your company.
Why should this matter? Well, ask the traders at Enron. Even mid-level employee accounts of those halcyon days in the Crooked E’s Houston, Texas headquarters suggest that everyone down to the tea boy suspected that the company’s business practices were dodgy in some indefinable way.
True, employees were unlikely to cotton on to a practice that took forensic accountants several years to unravel. Skilling and Fastow’s off-balance sheet vehicles that raised debt for the sole purpose of driving up the Enron share price to boost employee stock options in an infinite loop were certainly complex. But well into their financial trickery the signals from Wall Street were already red. Some securities traders started putting out reports suggesting a mismatch between stock performance and the company’s activities, especially after a power utility scandal in California.
When the Enron bubble finally burst, it didn’t just take down its 90,000 employees, many of whom invested their life’s savings in the stock. It also saw the dissolution of the respectable accounting firm of Arthur Andersen, whose accountants had endorsed the management’s creative accounting.
It could be argued that employees at the middle and lower levels in an organisation can hardly be expected to understand complex accounting practices. This is especially so when such innovations seem to escape the vigilance of the corporate boards — many staffed with high-powered names and talents (remember Satyam’s stellar cast of board directors). Not all corporations can boast of a senior whistle blower like Michael Woodford, who was sacked as President of Olympus for highlighting financial irregularities.
But here’s the point, especially for those who work in listed companies. Forget about intelligence gathering. There is no dearth of information and analysis out there in the public domain. This has been true for almost every failed corporation — from Enron, WorldCom to Lehman to Satyam and now Olympus (reports of spectacular investment failures started appearing in the press before Woodford raised the red flag). Indeed, healthy scepticism should rise in direct proportion to a company’s success and its size.
This is not a question of disloyalty but sheer practicality. Growing competitive pressures and the constant (and sometimes excessive) focus on shareholder value have meant that employees increasingly run the risk of becoming victims of managerial adventurism. The alternative is to keep the CV updated at all times.
