Case analysis of Infosys: Business ethics perspective

By | April 14, 2014

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1.        Introduction

 

From the case of Infosys it is easy to see that Narayana Murthy, the founder of the company has transform the 1981 year founded little software company into the first Indian company to be listed on the NASDAQ and become a world leader in IT consulting and software service provider, these achievement to a certain extent have close relationship with Murthy’s management practices in which his management philosophy and approaches, in the management’s perspective it would interesting and worthy to go into the case to study Murthy’s managerial skills and his philosophy. And below the essay will examine this great former CEO’s management practices in four aspects: business ethics, leadership, human resource management and strategic management in order to solve the following key issues and problems:

 

1.1    Business ethics

 

It is well known that a company should strike for the interests of the investors and shareholders but it is questionable that whether the companies should put their shareholders’ money on the effort of striking for a variety of stakeholders’ goodness in the name of social responsibility? The answer is yes, according to Narayana Murthy in this case.

 

1.1.1        The stakeholder view

 

The stakeholders in a corporation are the individuals and constituencies that contribute, either voluntarily or involuntarily, to its wealth-creating capacity and activities, and that are therefore its potential beneficiaries and/or risk bearers (Post, Preston, Sachs 2002) And according to this case, in the management philosophy of Narayana Murthy, there are at least three extra stakeholders that should be taken care of by the companies excepting the shareholders, the employees, customers and the society.

 

1.1.1.1      The employees

 

Infosys was ranked as the “Most Admired Indian Company” for 10 consecutive years by the Wall Street Journal Asia 200 (Sheth 2009) and another fact that Infosys is the first Indian company to offer employee stock options tells how much the company cares the interests of the employees as one of its most important stakeholders. As Murthy said, “It was our belief that the first duty of a corporation is to uphold respect and dignity for the individual”. More than just the duty of the company to treat the employees in the view of point of Murthy, employees are the most important assets to the company and such precious assets should be well-rested and that is why no matter what cases the work of the employees in Murthy end at five p.m. in any working days. On the other hand the employee asset view also shows one of the most important strategic orientations towards core competency which will be elaborated later in the strategic management part.

 

1.1.1.2  The society

Narayana Murthy concluded entrepreneurship could eliminate poverty only by large scale of job creating after his long time reflection on the entrepreneurship during the nearly five days’ detainment in a railroad station in Bulgaria in year 1974 (Rigoglioso 2007). As Murthy said, no corporation can sustain its progress unless it makes a difference to the widening gap between the rich and the poor. And as stated below the Infosys’s employee number had grown from 15900 in 2003 to 105800 in 2009. By creating large scale of employment will help wipe the tear of the poor according Murthy.

 

Figure 1.0 Growth of numbers of employees of Infosys (Bhatnagar 2008)

 

1.1.1.3  The customers

 

As a leading consulting and IT company, Infosys provides a range of products and services such as customized software development and maintenance, business process outsourcing (BPO), application service and so on to various customers from a wide range of industries globally. The important effect that the customers have on the Infosys can be seen from the great impact that the company had suffered from the slump in the U.S. technology market in term of projecting a lower growth rate of 30% for 2001 to 2002 financial years. One of the three concepts on which Infosys was build is the criticality of customized software, said Murthy, and that is why customer satisfaction is always the target for Infosys. On the other hand, in the highly competitive IT industry in India, providing comprehensive and quality service is critical to maintain the customers and create added value for the company and thus is the core competency of Infosys.

 

1.1.2            Why bother? The deontologists

 

Rather than focusing on the consequence the deontological theories emphasize more the motive of an action in judging whether it is ethical or not by focusing on the duties, obligations, and principles. Infosys’s value system that simplified as “The softest pillow is a clear conscience” best describes the Murthy’s expectation for the company to fulfill its duty to the society. As Murthy first said about the value system, “The importance you attach to your value system is reflected in the cost you are willing to incur for your beliefs and convictions”, in his words it can be seen that Murthy had admitted that in some cases adhering to the value system will be costly and thus become unwise in the cost beneficial perspective, but it is in such cases that our commitment to the value system can be tested. So Murthy’s value system is could be understood in the deontological way of rationality.

 

One deontological thinking that provided by the German philosopher Emmanuel Kant to could be easy to examine whether an action is ethical or not is through the “categorical imperative” (Trevino & Nelson 2007, p99). In another word, if an action done by an individual is ethical, then it should also be rationale for everyone to follow. This also explain why Murthy in several instances refused to take the short cut even though taking the short cut would bring a lot of economic benefits, if taking the short cut if necessary by Infosys is acceptable, then according to Emmanuel Kant every other company could also take short cuts if this company find it necessary, then obviously there are no rules that could confine the companies’ behaviors because they could avoid these rules and duties when they find out there is a necessity to take the short cut.