November 12, 2012
((The target audience my management students )
SENTENCING OF RAJAT GUPTA
I wrote in this Blog on June 19, about the conviction of Rajat Gupta by Federal Jury in Manhattan for professional misconduct and insider-trading.
Now on October 24, US District Judge, Jed Rackoff sentenced Rajat Gupta to two years in prison and also ordered him to pay USD 5 million fine. Rajat Gupta is one of the biggest catches so far for the Federal Government in its 5-year crack down on insider trading that has resulted in 69 convictions and shaken the entire security market across the globe.
Gupta spoke for the first time after his conviction and regretted terribly the impact of this incident on his family, friends and the institutions he worked for. He admitted that he has lost his reputation which he built for his life time and that the verdict is devastating. Even his defense attorney Gary Naftalis lamented that he was a role model and icon but now he is no more. The Attorney also said that while Rajat Gupta's friend Raj Rajaratnam benefited from the illegal insider trading upto USD 75 million, his client earned no profit. The Attorney also earlier urged the Court to a sentence of probation with instructions to perform community service, which the Federal Court found it difficult to accept as it wanted to send down tough message to those who indulge in professional misconduct (PS: In India, nothing would have happened to him). There were more than 400 letters written to the judge on behalf of Gupta which included Bill Gate and Kofi Annan.
As you know Rajat Gupta was the first non-American Managing Director of worldwide McKinsey & Co, Director of Goldman Sachs Group, Director of Proctor & Gamble, Trustees of Rocket Feller Foundation and Bill & Melinda Gates Foundation, founder of Indian School of Business, Hyderabad and Advisor to UN Secretary General.
Hence, what is the take-off for my management students who want to be vibrant and dynamic professional managers in the corporate world? I said earlier in this blog and in my many recent presentations on the subject made in various B-Schools in Mumbai that the fall of Rajat Gupta is a classic case of dominance of personal ethics (interest) over his professional ethics. It is a case of mixing pure personal ethics with professional ethics. All Directors/professionals have clear and sacrosanct duties of Board Room Secrets and Confidentiality, but unfortunately Rajat Gupta appears to have provided open lines for such secrets to his personal friends. What is important for you as professional manager is your determination and ability to discriminate personal ethics and professional ethics regardless of lure and temptation of pure personal interest.
(I may upload my entire presentation on the Fall of Rajat Gupta made in B-schools after some time)
Prof. Ram Mallar.
Mallarr Law Associates LLP
3, Silver Cascade, 110AA, Near Ruby Mills, Senapati Bapat
Marg, Dadar West. Mumbai 400 028.
Tel. No.: 2432 28413 (3 lines)