Economic liberalisation has often paved way for corporates to step in and further the business agenda for the greater benefit of the national and the global economic system. In pursuit of this goal, most corporates have been following a strict code of conduct set out by regulatory authorities for the smooth functioning of the corporate system.
However, there have often been instances when the corporate code of conduct gets breached and core values compromised in an attempt to chase profits and market at all costs.
Breach of corporate code
Recently, Mitsubishi Motors announced that it will reimburse owners of four of its variants in the wake of an investigation by Japanese transportation authorities that revealed the company had exaggerated the mileage readings of those cars.
Even Volkswagen's former boss Martin Winterkorn is under investigation for having allegedly manipulated the market by holding back information about emissions cheating at the automobile giant.
Some weeks ago, Suzuki Motor Corp patriarch Osamu Suzuki stepped down as Chief Executive and the Japanese automaker promised to cut executive pay and slash 2015 bonuses after the bruising admission of major flaws in its fuel tests. And who would forget the incident when electronics conglomerate Toshiba admitted that it had overstated its earnings by nearly $2 billion over seven years, more than four times its initial estimate.
Popular social networking giant-Facebook, came under much criticism after a Gizmodo report claimed that links to ‘conservative articles’ in the ‘Trending’ Topics Section were suppressed. The report indicated that the ‘trending section’ often reflected biases of those who were responsible for curating it.
These are just some cases when the fine line between corporate responsibility and corporate ethics gets blurred, often leading to situations that are not just embarrassing for the people involved, but equally for the brand too.
Impact on brand value
The breach of core corporate values in the pursuit of profitability and influence impacts the brands in an adverse way, often undoing the short term gains in no time. Though the companies might follow quickly with remedial measures, like Osamu Suzuki stepping down or slashing bonuses, but the irreparable damage takes time to fade away from the public memory.
In India breach of corporate code remains largely a widely practiced and an underreported phenomenon, though there have been sporadic instances when it caught the fancy of the public. Popular instances include Satyam Computers case and the much talked about 2G and AgustaWestland scams etc.
Commenting on the importance of maintaining corporate standards and taking precautions to protect the long term equity of the brand, Anantha Nayak, CEO, Cipla Heath says, “Brands are built on consistently being true to consumers. It takes multiple repeat experiences of a brand offering to generate credibility. Every touch point, the consumer comes across the brand is a “moment of truth” for the brand - whether on air, in store, in social media or during consumption.”
The prevalence of corporate malpractices in India reveals the inherent contradiction of the country’s business environment and the loose regulatory framework, a reality which needs urgent attention.
Speaking about the connect between corporate malpractices and brand devaluation, Dr. Bhaskar Das, Group CEO at Zee Media Corporation explains, “Ethics is a double edged sword but I think the core ethics is all about human values. Purposes can change but ethics and values are what hold everything together. If corporate ethics is undergoing a variety of interpretations; that is not a good sign, because society has its own way of having a backlash and it has an auto-correction process. I think in today’s consumer activism, any deviation from the core values will prove an adverse course for any brand. Moreover, brands don’t exist in vacuum, they are part of a company, and if they are not ethical even their products will not have the credibility to attract consumers. In today’s nano moments of truth, every brand is standing naked because you are up for scrutiny. I think rigid adherence to corporate ethics and brand ethics is better for markets to give better ROI’s.”
The fact that businesses should be run in tandem with corporate principles and not tweaked around the profitability, is a significant takeaway from the numerous examples of corporates who have compromised this code of conduct and are at the receiving of their marketing gimmickry.