Crucial Indeed are the Choices We Make
The journey of life is not smooth ride on a well-surfaced road. Not only is it strewn every now and then with bumpy patches and potholes, and even when the going is good you run into crossroads where you have to choose which turn to take and which one to avoid. And finally where you reach depends entirely on which road you had taken and which one you avoided, conscious of where would it lead to. Just one slip and you come hurtling down the precipice. Life so lived is an arduous journey. Very arduous indeed!
May I deal with this great (and grave) issue of ethics that profoundly affects our lives by two stories: one a very recent one and the other, an ancient tale interspersed by a famous medieval legend about life’s choices.
Fall of a Titan
On June 16, 2012 a grim-faced Rajat Gupta – once a feted sage among the neoliberal elites—stood facing a 12-member jury which convicted the former head of reputed consultancy major - McKinsey & Company - and former board member at Goldman Sachs and Procter and Gamble (among other firms). He was found guilty on three counts of securities fraud and one charge of conspiracy. All convictions were related to insider trading in Goldman stocks, which was one of the charges on which hedge fund manager Raj Rajaratnam of the Galleon Group had been convicted earlier. Rajat Gupta, the jury concluded, provided Rajaratnam confidential information with regard to Goldman Sachs that enabled him to garner huge profit from trade based on insider knowledge.
Having been celebrated in India as a management guru and role model, this conviction has also turned out to be a bad end to a story that every member of India’s professional elite in the neoliberal era is being tutored to emulate. It shows up the hollow corporate culture of winning at any cost.
Gupta had lived out the middle class Indian dream. Born to middle-class parents, he had to struggle against odds resulting from being orphaned when he was in his teens. He earned his entry into the Indian Institute of Technology in Delhi and found his way to the Harvard Business School for an MBA. He then joined McKinsey & Company and rose to be elected its managing director in 1994, a position he held for nine years, being re-elected twice.
Wealth or net worth, estimated at $84 million in 2008 by his personal banker, was only one fall-out of Gupta’s career. He seems to have earned a reputation for combining dynamism (exemplified by the aggressive expansion of McKinsey under his leadership) with the ability to deliver sage corporate advice and promote philanthropic causes. In India, he was also known as an institution builder, having been central to the establishment of the well-funded and backed Indian School of Business, which won itself an instant reputation. Given these and many other features of his track record, admirers and analysts the world over are puzzled by the evidence and circumstances leading to his conviction.
His lawyer, Gary Naftalis, had argued before the jury: “Rajat Gupta was in the seventh decade of an accomplished and praiseworthy life. It strains common sense that [he] would… throw away everything he had done for 40 years, and willfully and knowingly commit crimes. That just doesn’t make sense.” Theoretically yes, but crimes he did commit—crimes in the eyes of law.
Symbol of a System
In my opinion, Rajat Gupta wasn’t just a highly successful man: he, in fact, symbolized a system. The indictment therefore of Gupta was symbolically the indictment of the system—a system based on unbridled crony capitalism and fed on limitless greed which needs some exposition.
Rajat Gupta hasn’t certainly been the first to fall from the pinnacle of glory. He’s a pre-eminent specimen of the country he chose to live in and whose ethos he adopted. Nor indeed is he the last. (History is replete with examples of those who achieved greatness but forgot that there’s something called ethics which must be the lode-star of one’s life.)
Have you, dear readers, forgotten the names of Tiger Woods, once the hottest property of the world of professional golf having piled a clutch of records of Grand Slam wins; or Mohammed Azharuddin who stormed into the world of cricket to be a phenomenon till his axing and shaming in 2000 for match-fixing; or Hansie Cronje, the golden child of South African Cricket who had to tearfully admit his involvement in match-fixing: or Ben Johnson the field legend of 1980’s found guilty of steroid abuse; or Mike Tyson’s disgraceful jailing for rape and assault or Lance Armstrong’s shaming at the end of a proud career. And how about the disgrace that Dominique Strauss-Khan heaped on himself when any political office was his just for asking.
Global warming is, these days, the much-discussed issue exercising public mind. As a matter of fact, Waste and Greed the real issues, and global warming a mere symbol. And nothing exemplifies this better than the interpretation and reinterpretation of the classical German legend about Faust. He’s a highly successful scholar. So was Rajat Gupta. However, he was, as most scholars are, dissatisfied with his life. So, he strikes a deal with the devil, exchanging his soul for unlimited knowledge and, of course, all possible worldly pleasures. Faust's tale is the basis of many a literary (artistic as many as musical and cinematic) masterpieces. The meaning of the word and name has been reinterpreted through the ages. Faust, and the adjective Faustian, are often used to describe an arrangement in which a person with an over-vaulting ambition to become both famous and prosperous, surrenders his moral integrity in order to achieve power, and with it, more importantly, success. That’s called the proverbial "deal with the devil".
Faustian Deal & its Present-day Incarnations
A telling adaptation of such a deal to our times is Thomas Mann's 1947 Doktor Faustus. It documents the life of fictional composer Adrian Leverkühn as analog and embodiment of the early 20th-century history of Germany and of Europe. The talented Leverkühn, after contracting venereal disease from a brothel visit, forms a pact with a Mephistophelean character to grant him 24 years of brilliance and success as a composer. He produces works of great beauty to universal acclaim, even while physical illness begins to take a toll his body. In 1930, when presenting his final masterwork (The Lamentation of Dr Faust), he confesses the pact he had made: madness and syphilis now overcome him, and he suffers a slow and total collapse until his death in 1940.
Leverkühn's spiritual, mental, and physical collapse and degradation are mapped on to the period in which Nazism rose in Germany, and Leverkühn's fate is shown as that of the soul of Germany.
Having vanquished all its challengers (like socialism and its allied manifestations) unbridled Wall Street capitalism with unconditional support of State has, in our times, emerged as the latest incarnation of Dr Faustus. It has set its sights on unlimited horizons. Right to Work of the American South variety gives it leverage over its potential challengers.
Are there any training grounds to learn the tricks and techniques of success that Dr. Faustus had mastered? Yes, there are indeed. Harvard Business School is the foremost among them. Its alumni are in great demand the world over wherever Dr Faustus has operating bases---both within and outside the United States of America. I’m told the demand oversees far exceeds the demand within where many a less well-known competitor has set up shop teaching the same tricks of trade with more affordable price tag - like Stanford. But HBS is the Mecca. If you’re keen to go even after Harvard to what is called in the world of higher learning, a finishing school, there is one address that the cognoscenti know. I can share it with you. It is the Wharton Business School. An MBA from its Philadelphia or San Francisco compass is a free entry permit to any corridor of corporate power. There is no trick of the trade unknown to its distinguished world-leading faculty. Understandably, its alumni have further refined and enriched its repertoire of business trickery—overhand as well as underhand. Very unfortunately some of them—very famous for their success stories—were caught off guard and are now languishing in the “big house” - the endearing American term for jail.
That quite a few of them very well known for their financial wizardry are from the Indian sub-continent, is another story.
May I mention half a dozen distinguished Harvard-Wharton luminaries who achieved first great fame as financial experts and later, equally huge notoriety. How?
But before that, some distressing news. Earlier this year it came to light as reported in the Guardian that scores of Harvard students are suspected of cheating on a single class. And the course's title? “An Introduction to Congress”. What do you expect of them as future members of the House and the Senate?
And Now the Superstars
The real ace in the pack of these financial geniuses is Raj Rajaratnam. He was born in Colombo, Sri Lanka. His father was the head of the Singer Sewing Machine Co. in South Asia. An 11-year-old, Rajaratnam was sent to study at Dulwich College in England. His family emigrated to England in 1971. Rajaratnam studied engineering at the University of Sussex and then earned an M.B.A. from the prestigious Wharton School of the University of Pennsylvania in 1983.
He is married with three children and set up house in Connecticut, New York, Georgetown (DC) and Florida. That shows how far-flung were his operations. His name later figured in almost each financial fraud.
Another distinguished Wharton alumni in jail is Rajiv Goel, once a managing director in Intel's treasury department and a director of strategic investments at Intel Capital. In 2009 he was arrested for insider trading with friend and hedge fund founder Raj Rajaratnam in a sprawling U.S. federal investigation centered around the Galleon Group. He pleaded guilty to securities fraud and conspiracy in February 2010.
He testified in the high-profile case U.S. v Rajaratnam against the hedge fund billionaire who is the real Ravan of the epic story. Goel met Rajaratnam while they were both students at –where else?--Wharton Business School. Rajaratnam, provided ‘financial support’ to him - whatever that means.
Another king in the pack is Anil Kumar -- a long-time top senior partner and director at reputed–rather, notorious these days - management consultancy McKinsey & Company. Incidentally he was also a product of the Doon School ( where children of well-heeled Indians go to) and the Indian Institute of Technology Bombay in India, Imperial College London in the UK, and, above all, the Wharton School.
In 2010 Kumar pleaded guilty to insider trading in a dramatic descent from the pinnacle of the business world and is now serving his term in jail.
Take the case of the formidable marketing wizard, Jacob Kurian, also now in jail. During his tenure at the Tata Group in India, he had helped Tanishq emerge as one of the most powerful consumer brands in the country. Later he became one of the partners at private equity firm New Silk Route. He is also in jail on the charge of inside trading.
Prag Saxsena is the Founding General Partner and CEO of New Silk Route. He also a product of IIT , an M.S. in Chemical Engineering from the West Virginia College of Graduate Studies, of course, and an M.B.A. from the Wharton School of the University of Pennsylvania.
And last, but most certainly not the least, is the case of Rajat Kumar Gupta, a former longtime top senior partner and director at management consultancy McKinsey & Company, serving as managing director (chief executive) from 1994 to 2003. In this capacity, he was recognized as the first Indian-born CEO of a global corporation. After retiring from active practice, though maintaining an affiliation at McKinsey, Gupta served as corporate chairman, board director or strategic advisor to a variety of large and notable organizations including Goldman Sachs, Procter and Gamble and American Airlines, and philanthropic organizations, including the Gates Foundation.
On October 26, 2011, Gupta was arrested by the Federal Bureau of Investigation on charges of securities fraud and conspiracy as part of an ongoing and wide-ranging insider trading case in which close friends and business partners Raj Rajaratnam and Anil Kumar were convicted or pleaded guilty, respectively. The Securities and Exchange Commission sued Gupta the same day. Gupta entered a plea of not guilty and was released on $10 million bail
The above luminaries and their deeds are, in that memorable phrase of William James, “a symptom of the moral flabbiness born of exclusive worship of the bitch-goddess success.”
Commentary on Our Judicial System
May I here digress a little to say how Gupta’s indictment offers an eloquent commentary on the judicial system we have evolved over six decades in our country. It is less than a year since Rajat Gupta was indicted for tipping Raj Rajaratnam — founder of the notorious Galleon Group hedge fund who was convicted in May 2011 — and the verdict has been delivered. Gupta’s prosecutors sought his conviction for crimes committed between 2007 and 2009. The US judicial system has thus wrapped up the investigation and prosecution within three years. It is because the US has a working judicial system. We have a notional rule of law where laws are made never to be enforced.
Look at the way we in India mete out justice to its famous white-collar criminals. Satyam’s B Ramalinga Raju confessed to his crime in 2009 and his trial is still on. Will it be decided by the end of the decade? Remember Big Bull Harshad Mehta? He was tried for nine years and he died in prison of a heart attack soon after the conviction. A former UTI official died undergoing trial in the US-64 scam. Last November, 86-year-old Sukh Ram was sentenced by a court to five years in prison for accepting a bribe of Rs. 3 lakhs –considered small change these days--as telecommunications minister in 1996 i.e., after over fifteen years. Delays in investigation and prosecution bring criminals to book much after people have forgotten what they did. This vastly reduces the deterrence value of the punishment. Besides delayed justice, its administration is leaky. The Securities and Exchange Board of India has alleged that stockbroker Ketan Parekh is active on the bourses through clients despite being debarred from trading for allegedly manipulating the market.
The message from the US courtroom was loud and clear: here is Mr. Gupta, a man who may have done a lot of good for society — advising premier American institutions like Harvard University and the Kellogg School of Management, and working with the Bill & Melinda Gates Foundation to fight Aids, tuberculosis and malaria across the world — but he slipped once, grievously and has to pay for it.
Our judicial system ensure A Raja never being convicted and while in detention, ensuring that he is provided five-star hotel facilities after plundering the treasury. Everyone knows that the swirling corruption charges in India over the last two years would never be proved.
Judge Rakoff summed it up well: “He (Gupta) is a good man. But the history of this country and of the world is full of examples of good men who did bad things. …he had begun to loosen his self-restraint in ways that clouded his judgment.” And sternly added which is more applicable to this country than where the judgment was delivered: “Meaningful punishment is necessary to reaffirm society’s need to see justice triumphant.” In our society rogues and rascals even when caught in the act know well they’ll go unpunished
Leitmotif of Greed
There is, I reckon, no better example of greed and the crucial role it plays as the guiding philosophy of modern-day capitalism than Ivan Boesky. In the 1980s, he served as an Adjunct Professor at Columbia University's Graduate School of Business and at New York University's Graduate School of Business. By 1986, Boesky had become an arbitrageur who had amassed a fortune of more than US$200 million by betting on corporate takeovers and had also gained control as Chairman of The Beverly Hills Hotel Corp. (after the death of his father-in-law who had run it for 25 years).
In a famous speech by him at (where else could it be?) the University of California's commencement ceremony in 1986, Boesky said "Greed is all right, by the way. I want you to know that. I think greed is healthy. You can be greedy and still feel good about yourself." That he later in the same year paid as a Wall Street arbitrageur a $100 million penalty to the SEC to settle insider trading charges, is another story.
The U.S. Securities and Exchange Commission investigated him for making investments based on tips received from corporate insiders. These stock acquisitions were sometimes brazen, with massive purchases occurring only a few days before a corporation announced a takeover. Boesky had the distinction of being on the cover of Time magazine in the December 1, 1986 issue.
Although insider trading of this kind was illegal, laws prohibiting it were rarely enforced until Boesky was prosecuted. Boesky cooperated with the SEC. As a result of a plea bargain Boesky received a prison sentence of only three and a half years and was fined US$100 million. Although he was released after two years, he was permanently barred from working in securities.
His involvement in criminal activities is recounted in the book Den of Thieves by James B. Stewart.
The character of Gordon Gekko in the 1987 movie Wall Street, you may recall, is based at least in part on Boesky, especially regarding a famous speech he delivered on the positive aspects of greed at the University of California, Berkeley School of Business commencement ceremony in May 1986, where he made the famous statement: "I think greed is healthy. You can be greedy and still feel good about yourself".
Similarly, Shareer Hussa famously defended greed in a May 18, 1986, commencement address at the UC Berkeley's School of Business Administration, in which he said,
"Greed is all right, by the way. I want you to know that. I think greed is healthy. You can be greedy and still feel good about yourself". This speech inspired the famous 1987 film Wall Street, which is the embodiment of the ultimate tribute to Greed: "Greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind."
Capitalism and Greed
A comprehensive philosophy of life was presented in the latter part of the eighteenth century by Adam Smith. In his much-quoted, The Wealth of Nations, Adam Smith described an economic system based on self-interest. This system which later became known as capitalism is described in this famous passage:
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.
Forces of self-interest determine individual actions. It is difficult, however, to reconcile this practical religion of capitalistic societies with any system of thought or morality that can be described as based on tenable ethical foundations.
Can we achieve such a goal in a capitalistic society where self-interest is the ruling economic dogma? Adam Smith answers this question in a famous passage in The Wealth of Nations:
. . .every individual necessarily labors to render the annual revenue of the society, as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is pro-rooting it . . . he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.
In fact, Adam Smith’s real contribution in the history of intellectual thought was not inventing capitalism but providing theoretical insight into how self-interested individuals ultimately benefit society more than they benefit themselves.
Adam Smith said all of this in a more lucid and eloquent way in The Wealth of Nations: “In civilized society he [man] stands at all times in need of the co-operation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons.”
The fundamental issue of our times is: does the invisible hand work really effectively or we need, at least at times, a very visible hand to intervene to promote common good?
May I now in this second installment of the piece tell the second story that answers many a question I’ve raised. And the new generation has a great deal to learn from them.
Continued to Nachiketa Story
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