Friday, March 04, 2011

Rajat Gupta's Double Standards?


Rajat Gupta is in serious trouble [and here].

His troubles are serious enough for him to resign from the Board of P&G -- "A company spokesman said he resigned to prevent any distraction to P.&G. and its board."

Then, why are they not serious enough for him to step aside from the ISB Board? Why is it okay to let ISB deal with "distractions" arising from his troubles? As DNA reports:

Experts on ethics and governance pointed out that it is nothing short of double standards that Gupta chose to resign from the board of institutions in the US while remaining on the board of Indian institutions.

4 Comments:

  1. Dheeraj Sanghi said...

    I agree that he is in big trouble. If you read his email to ISB board members, he says that his lawyer has told him that SEC has no direct proof, no recordings, etc. This is funny. Why is it important to a board whether the proof is strong or weak. To me, it seems that what matters is whether he did it or not. It says that he did not trade himself, or received any benefit, and there was no quid pro quo. Again, why does it matter to the ISB board, whether he personally benefited. The only thing that matters, again, is whether he gave information or not. Of course, he says that he is not guilty, but having all these unnecessary words around from a person who speaks every word very carefully is a bit unusual, and to me it shows that he is in deep trouble.

  2. Suresh said...

    Note that the New York Times article also says:

    Mr. Gupta holds philanthropic posts, including a senior advisory post at the Bill & Melinda Gates Foundation and a board seat at the Rockefeller Foundation.

    There is nothing in the article to suggest that he has resigned those positions, at least as of yet. He has only resigned the P & G position. There is a good reason for doing that, whether or not you believe in Mr. Gupta's guilt. From the article:

    Mr. Gupta is also accused of disclosing information to Mr. Rajaratnam about P.& G.’s 2008 fourth-quarter earnings on the eve of their release.

    Given this accusation, one could argue that Mr. Gupta's resignation is the ethical option if he is innocent as he claims. If you were innocent but faced a similar accusation, would you be acting ethically by sticking around?

    I don't know Mr. Gupta and hold no brief for him but I think DNA and you are being hasty in suggesting double standards.

  3. ashok said...

    To be fair to Rajat (he is a class fellow from IIT hence the use of first name only) it has only been a week or so since the scandal broke out and he has had his hands full in dealing with the issue. In due course, in all likelihood, he shall be resigning from other boards he represents.

    ISB has had serious issues with ethics and and its senior management (its previous Dean and the founding Director before). If it is to grow into a respectable educational institution it will be necessary for it to stress on ethics. It is unfortunate that a recent statement from its present Dean ( as it appeared in TOI on page 11 a few days ago) while stressing on the need to mantain the high standards of education made no mention of mantaining standards of ethics and values. Education lacking in these is detrimental to society. It also advocated silence. lack of transparency and silence do not go towards enhancing ethics.

  4. Abi said...

    @Suresh: Thanks for pointing out the stuff about the accusation that Gupta provided some insider info on P&G; I had missed that connection, and went down the 'double-standards' route.

    My post was informed by a concern for propriety; I thought Gupta did the right thing at P&G, but not at ISB. And propriety is still the main issue. That's why Gupta has been under pressure to step down (or step away) from key positions -- and he has done exactly that at EMRI (which now resurrects the 'double standards' issue!).

    Sticking to his leadership position at ISB becomes more and more dicey with every embarrassing revelation, allegation and news report. And stepping aside (please note, I'm not saying stepping down) is the right thing to do -- especially at academic institutions that depend so much on public trust.

    ISB is also a special case because of its experience with scams that claimed two of its high officials in the past: (a) the Satyam scandal claimed an ex-dean, and (b) and the on-going Wall-Street-insider-trading scandal has claimed an ex-board member (who has since pleaded guilty, and is tipped to be a star witness in the Rajaratnam trial).