Satyam chairman Raju’s crime and the Times’ reaction

About a couple of weeks back, I had a very interesting conversation with a friend (and former classmate). The converstion started off with him telling another friend that “a day will come when you will look for a meaning, a larger purpose in your job/life”. I enquired what he meant by a larger purpose and the conversation moved to self-interest and sacrifice. By the end of the discussion his position was that sacrifice should not be the guiding principle in normal life but that it may be necessary in certain (rare) situations. I claimed that pro-sacrifice and anti-selfishness principles are the dominant ethical principles today, to the exclusion of everything else and this has severe consequences in our lives, as these principles provide no guidance (at best) in normal life and actually create an undeserved sense of guilt if accepted. He responded that he did not believe that the pro-sacrifice ethical principles had many far reaching consequences. Since we were running out of time at this point, I said that I would provide evidence for my claim. Here is the first piece of evidence. This post seeks to show how prevalent the “selfishness is evil” theme is in the culture at large.

In its leading frontpage article on friday, The Times of India asks

Did Raju Pick Lesser Of 2 Crimes?
He Said He Inflated Figures, But Did He Divert Money?

… Raju said that in the second quarter (July-Sept) of 2008, Satyam showed an operating margin of Rs 649 crore (which was 24% of revenue) when it was actually only Rs 61 crore (that’s 3% of revenue). This, he indicated, was part of a fudging exercise over years to inflate profits—presumably to keep the stock price up and the magic of Satyam alive.
Essentially, what Raju confessed to was creative accounting—showing cash where none was generated and therefore did not exist. But, as he kept emphasizing, he did not profit personally from it. Still a crime, but not top of the pops in order of heinousness.

It’s a crime to show money in the books where none existed, which is what Raju said he did. But it’s a worse crime to divert money that actually did exist. 

Note the assertion that Raju’s crime would be less heinous if he did not profit personally from it. I do not know if this is true as per the Indian penal code. It is the moral angle that is more interesting. Consider the two possibilities.

1) What Raju wrote is true – that Satyam really was making very small profits (compared to the IT industry norms) and Raju inflated the books to keep the company going.

2) Satyam was making normal profits and Raju siphoned them off.

In both cases, Raju betrayed the responsibility he had as the company founder and board chairman. In both cases, he defrauded the shareholders. The difference in the two cases is that the motive in the first case is somewhat less personal than the second. So what does the Times’s assertion mean? It could mean one of two things:

a) Self-interest (personal profit in this case) is bad in itself.

b) Self-interest is amoral (neither good nor bad) but concern with other people’s interests (a larger purpose) is good.

I am sure that the pragmatist Times would hold that there is nothing wrong with personal profit if it is obtained by honest means. Its position on the issue (if it ever took the trouble of taking a definite position at all) would essentially be something like:

Selfishness is (regrettably) part of human nature and it is impractical to oppose it consistently. However it needs to be restrained in favor of a larger purpose (the common good).

So the Times assertion essentially means b. Now consider what that implies. It implies that the supposed “larger purpose” (keeping Satyam going in this case) can be a mitigating factor in the moral judgement of Raju’s actions. If things had gone a little differently and Raju had said that he fudged accounts after considering the delicate position of the global economy, the troubles his employees would face if Satyam were to shut down etc, etc…, the Times would find it difficult to take a unequivocal moral stand. After all it routinely justifies and calls for fudging the national accounts – by imposing fuel prices, interest rates, lending rates, printing money and a host of other such actions – on precisely such grounds.

Holding self-interest as amoral results in moral paralysis. One can no longer say that fraud is wrong irrespective of the motives behind it. All that is needed to justify it is some sufficiently “larger” purpose. And since everyone has a different “larger” purpose, a different “shared” vision for how other people should live – purposes such as Maharashtra for Marathis or India for Hindus or universal health care or universal education or the rule of Islam or saving the planet – anything goes.

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3 Responses

  1. “if Satyam were to shut down etc, etc…, the Times would find it difficult to take a unequivocal moral stand.”
    The Times, and most people in general, seem to have some clear cut ideas of pragmatism – some basic rules they follow, though they probably don’t know about it.

    When it comes to government, the fudging is not seen as criminal because it is the government which is working for the “greater good”. When it comes to individuals, and other “for profit” entities, all fraud will be condemned and they will demand that the law take its own course. But if something like you suggest (fraud to save jobs or something) happens, they will sympathize with the criminal but will want to punish him nevertheless – the law is supreme. Your motives were right but the method you adopted were wrong, they will say. When it comes to “non profit” entities, these are treated like the government is – tax breaks, cheap land etc etc. Anyone looking in would find this absurd. But for the frogs in the well, this is commonplace.

    And the same applies to taking a moral stand at the three levels – when it comes to the government and “non profit” entities including various collectives (groups formed on the basis of religion, caste, parochial interests etc) – the “greater good principle” rules – sacrifice the smaller group to the larger one; the only exception here is PC, which, as they see it, is a support for the “weak” – the definition for which differs from group to group. The individual and “for profit” entities – these will always be looked down upon as a necessary evil.

    This system only breaks down when two equal-sized groups that are both fighting for a “greater good” collide. Till then, the Times won’t have a problem editorializing. Actually, even then, it would suggest some kind of compromise. It will never allow itself to be paralyzed, preferring a downward spiral instead.

  2. I dont agree fully. The sympathy that they would show towards criminals who claim to seek some “greater good” is proof of moral paralysis. It is precisely that sympathy which allows them to support criminal actions by the government. Note that in many of the editorials supporting the recent bail-outs, the editors did acknowledge a moral hazard. The moral paralysis is what prevents them from taking or advocating any principled action in any direction.

    they will sympathize with the criminal but will want to punish him nevertheless – the law is supreme.
    True, but that is a legal stand, not a moral one. It is the moral stand which is crucial.

  3. ” But, as he kept emphasizing, he did not profit personally from it. Still a crime, but not top of the pops in order of heinousness.”

    This means the writer is defending Raju.Quite a difficult task But we can assume the man’s moral compass is equal to the task.
    Correct me If I am wrong.

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