Adding ‘value’ to the business

Holmes was the CEO-founder of Theranos, a promising new healthcare start-up, once valued at over $9 bn, that pitched itself as a revolutionary alternative to painful blood-testing procedures. Having garnered the trust of business barons like Rupert Murdoch and Larry Ellison, she managed to raise as much as $900 mn in funding. Holmes even had the likes of former US President Bill Clinton and the current President Joe Biden rooting for her. The cookie crumbled when a set of articles in a business journal and regulatory audits revealed potentially hazardous shortcomings in the company’s technology and Holmes’ proclivity for exaggerating numbers.

Holmes’s hubris is not without precedent, as the high corridors of international firms are rife with examples of white-collar crime perpetrated by some of the biggest players. From the likes of ENRON, one of America’s largest energy companies which was hauled up for a billion-dollar accounting scandal and eventually declared bankrupt, along with its accounting firm Arthur Andersen, which was subsequently dissolved, to the likes of the Lehman Brothers, whose bankruptcy filing paved the way for one of the biggest economic crisis of our times – the 2007-2008 market crash.

India is no stranger to malfeasance of an ‘enterprising’ kind. In 1992, market manipulator Harshad Mehta perpetrated a stock market scam which cost us $1.3 bn. It was in the aftermath of the securities scam that SEBI flew into action and plugged the loopholes that plagued India’s banking system and the BSE’s transaction protocols. Another case that shook the nation was the Satyam Computers scandal, which saw the founder Ramalinga Raju and other promoters put in place a veritable flow chart of sorts on carrying out wide scale frauds – from fake billings made for services to international clients to fictitious bank statements and confirmations that were provided to auditors as proof of balance at the time of closing the books. The scam, which involved a sum of about $1 bn, compelled the government to step in and carry out an unprecedented bailout exercise, a rescue mission that saw the dismissal of the board members and the handing over of the company to a leading business house.

Other individuals who have been in the news for all the wrong reasons include Kingfisher Airlines founder Vijay Mallya, the poster child for everything wrong with the Indian aviation industry; and diamantaires Nirav Modi and Mehul Choksi who set into motion the PNB scam - India’s first major banking scandal, which involved a staggering Rs 15,000 cr of the public’s money. Since then, we’ve had a whole lot of ‘reputed companies’ making waves in India for financial misdeeds such as DHFL, IL&FS and Yes Bank.

In this backdrop, the Centre has given the green light for the creation of the National Finance Reporting Authority, an independent body that does not require approval from the Parliament and will have wide-ranging powers to bring to task auditors and audit firms who have sided with economic offenders. The body will act as a watchdog, and override the powers of the Institution of Chartered Accountants of India, which until now was responsible for disciplining auditors.

It might be unfair to brand all businesses under the same umbrella of recipients of ill-gotten wealth. But business ethics or values is never really given top billing as a subject. Amidst the rush of spreadsheets and PPTs detailing how companies can maximise profits, build engagement, meet shareholders’/investors’ expectations and in the process set even unreasonable performance targets for its staffers, what’s getting left behind is that little voice in one’s ear – the one that tells you to act consciously and conscientiously.