Larsen & Toubro, India’s biggest engineering group, is gearing up to expand its business to be declared as a global technology leader. Sadly, the company’s image is at high risk due to its alleged involvement in the Cognizant Bribery case.
The allegations came to light after US-based Cognizant Technology Solutions Corp agreed to pay $25 million to the US Security and Exchange Commission (SEC) to settle bribery charges in India, allegedly L&T has helped the software company.
In response to it, L&T has said that an external expert will be taken on board by its audit committee to probe the bribery allegations. Moreover, the customers and experts believe on a transparent probe into its alleged involvement in the bribery case will help the brand L&T regain its name and fame.
“If business leaders like L&T succumb to pressures and indulge in unethical practices, it means a loss of reputation for the company but there are other consequential impacts and financial risks too,” said Kavil Ramachandran, Executive Director, Thomas Schmidheiny Centre for Family Enterprise at the International School of Business, Hyderabad. “Business leaders have the responsibility of setting benchmarks and bringing about positive change.”
After this unfortunate incident, the hushed gossips about the “known secret” is clearly heard which ultimately concludes that international companies often get Indian partners on board to pay bribes in order to speed up approvals from local agencies, and that the amount is added into the contractor’s bill. This creates a win-win situation for both because the international company doesn’t get involved in this illegal act, while the Indian partner can go ahead with the project.
L&T being one most successful engineering company enjoys brand equity that has ensured good name for it and that there is no knee-jerk reaction to the Cognizant bribery charges. Equity analysts said that they would not put this down as risk factor just yet.
Usually, after such alleged involvements, a company’s economics is highly affected but when it comes to L&T, things are a bit different, to the contrary shares of the company have remained unaffected. In fact, L&T regained almost 11% on the bourses, compared with a 5% advance for the BSE Sensex, since the news broke last month.
L&T has, in the past, faced a few allegations of alleged transgressions.
The brand, Larsen & Toubro, is seen as a “nation builder” and thus, enjoys enormous equity which doesn’t affect the company at present rather will get the benefit from the doubt. A company as big as this has been able to mark such a good name that mere acquisitions don’t affect it largely.