# Ethics



## Guest (Apr 19, 2006)

*'ETHICS - COMING TO A PLACE NEAR YOU.'*



By 

SALLY RAMAGE ® *[Registered Trade Mark No. 2401827, Trade Marks Act 1994*]



Keble College, University of Oxford was the setting for a low-key World Ethics Forum from 9th to 12th April 2006. This was a forum paid for mainly by four organisations in almost equal shares, namely the United Kingdom's DFID[1], The World Bank, USAID and AusAid. Most of the funding was used to enable delegates from seventy countries to meet and organise themselves.



This ethics forum is a top-down affair, the next stage being to create regional pockets of Ethics awareness, aimed mainly at removing corruption and fraud from governments. The literature states the expected outcome as follows:

"This conference forays the area of leadership, ethics and integrity which is increasingly seen as an important and currently missing link in governance work but one on which little is known or agreed upon. This event is an opportunity to bring together leading scholars and practitioners and explore with great rigour the thinking and lessons from experience to guide operational engagements in this area. The impetus for this work and the conference is the increasing demand for support on leadership and on public sector ethics from regional units and countries themselves (including in post-conflict/ fragile countries)".



I met the Pulitzer Prize Winning Journalist from Nigeria, OLOJEDE[2], who has been crusading for good governance in his country since the 1980's, and many of the World Bank's personnel. 



Martin Hancock, BSc, MSc, and Chief operating Officer for Westpac in London tackled a contemporaneous subject. Martin represents Westpac on matters of corporate responsibility in the Northern hemisphere and in my opinion his subject 'Ethical banking -an oxymoron?' is the most interesting. He said that ethical banking has been described as the provision of financial services that are designed to promote equity and sustainable development. He said that financial institutions have risen to this challenge, both at the individual and sector level, and using Wespac Banking Corporation, the global leader for sustainability in the banking sector, he examined developments and achievements from the perspective of customers, employees and the community, the needs of stakeholders and not just shareholders, best practice, and ethics as a mainstream subject. This is true as we remember that HSBC Holdings had won 'Best Corporate Governance Transparency Awards' in 2002.They made a roaring profit last year but has been taken to task for high interest rates.



Translating that into the banking and social situation in Georgia, as told by Dr. Londa Esadze , the Co-ordinator of the TraCCC's Money Laundering and Economic Crime Programme in Georgia, who concluded that the developing of democracy in post-Soviet republics is a strained and drawn out process and there is no guarantee of success[3] because authoritarian traditions remain strong, even among the best educated.. Corruption still remains. In Georgia, corruption is a major problem and it seems that after the first flush of anti-corruption efforts by all, such countries slip back into autocratic, vertical (hierarchical) management, weak horizontal links between organisations and an organisational structure based on personal rather than societal interests- ie, the corporate culture[4] reverts to its former state. Without an ethics policy, corporate cultures become rotten as such happened at Enron.[5]



_ The Balkan countries suffer from a significant lack of knowledge on relevant EU legislation_*[6]*_._

Who were the delegates from Eastern Europe? Apart from Dr Londa Esadze, there was Dr. Mikhail Dmitriev, Research Director of the Russian Centre for Strategic Research, Ms. Aive Pevkur of the Republic of Estonia, Dr. Dijana Plestina of Croatia, Bojana Skrobic - a Youth coordinator from Bosnia/ Herzegovina, Mrs Gunta Veismane of the Republic of Latvia and Mimi Zajc of the National Chemicals Bureau of the Republic of Slovenia.



Are they applying the OECD corporate governance principles in Eastern Europe? Are they using International Accounting Standards in Eastern Europe? In Serbia, for instance, they still use the local accounting standards[7]. 



But the World Bank ranked Serbia the best business reformer in 2005[8]. The 2005 World Bank report, which is an annual report and provides a global ranking of 155 nations on key business regulations and reforms in every country. This World Bank report, as summarised[9] stated: -

1.Serbia and Montenegro moved start-up registrations from its courts to a new administrative registry.

2.Slovakia imposed time limits on the issuing of trade licences.

3.Poland was the most active reformer of business licensing in the world.

4.Serbia and Montenegro and Macedonia adopted new labour laws, making regulation more flexible.

5.There are three new private credit bureaus, one each in Lithunia, Romania and Slovakia[10]

6.There is a new online credit registry in Bulgaria.

7.Collateral agreements are now more easily facilitated in 4 countries - Bosnia and Herzegovina, Croatia, Romania and Montenegro.

8.Romania has introduced at flat tax rate of 16% since 2005.

9.Hungary has introduced electronic filing of customs documents.

10.Serbia and Montenegro have reduced the time to enforce a simple contract in the courts from over three years to just under two years!

11.Similarly, the Czech Republic, Latvia, Poland[11] and Slovenia have all reduced delays in the courts.



Ethics and transparency policies affect the ordinary man globally when high-risk investment in one country is made, using a country's pensions funds, say, and without full knowledge of the poor investors, pensioners, and employees. If countries governments do not publicise their countries workings, investors remain totally ignorant of the huge risks taken with their money. For instance a merger involving a German company means that German rules will apply; a merged entity will have to adopt co-determination if one-third or more of the workers are German.



A country's government must make itself transparent not only for its own people but especially because of trade. An ethical government will attract more trade to that country Macroeconomic models of the effects of trade over time reveal that trade accounts for a substantial gain in a country's GDP per person over time.[12] But what is very worrying, in my opinion, is the fact that the World Bank helps such emerging markets who are then able to trade, complete buy-outs and mergers and acquisitions with companies in the developed world - can it be that a World Bank aided Eastern European company which merges with an American or British company, is indirectly helping such developed countries to profit even more,

When such aid could have helped two companies in two developing countries to better themselves? Another way of saying this - is the value-added through World Bank aid in Eastern Europe going the wrong way - to the already rich countries.

These are all ethical issues to be addressed.

Staying with Eastern Europe and exploitation, we look at the oil and gas situation. A website on Russian Oil and Gas exploration displays this cry to protect the global environment in 2006: ​ 

'_It is painful to see how few improvements there are in the lives of northern Russian peoples.*[13]* These few improvements are more than cancelled out by the damage done by organisations developing these regions. Over many years, day and night, gas-burning flames leave everything in a crimson glow. Oil has been floating on the tributaries of the Ob, the forest has been cut down to the shores. Reindeer pastures have been perishing under the tracks of cross-country vehicles. _

_The former Soviet Union has a long history of oil and gas exploitation. Much of the operations take place in the north, which produce 78% of Russia's oil and 84% of its natural gas. Indigenous people suffering from environmental, social and health problems populate the same areas. In Khant-Mansy Autonomous District of Western Siberia, as many as 1,000 oil spills occur every year. Many indigenous families have lost their access to adequate pastures for reindeer herding, a cornerstone of their cultural well being. Oil companies response have been token at best. For example, in return for leasing its land (recently purchased by British Petroleum), one family's payment consisted of a talkie-talkie, a generator, and 8 sacks of flour, sugar and batteries&#8230;. Today, throughout the area, oil spills and casual pollution blacken the wetlands, raised roads trap water and ruin forests. Fires caused by oil workers' carelessness and petroleum soaked debris send columns of smoke out that blight huge territories. Western Siberia, like the America's Appalachian coalfields, is going to be the sacrifice area for the EU's investors to get fat on._



It is said that even in the United Kingdom, mother of democracy, there are still corporate ethics issues, I agree. 

There are huge problems to be faced by all countries - As people talk in dismay of the Nigerian email frauds, worth a global total of several million pounds a year, not condoning, but reminding ourselves that fraud in the United Kingdom was some 35 billion pounds in 2004, making that global fraud a drop in the ocean of our country's fraud, insured against so as not to bother us. 



Do we really want to enrich ourselves by investing our money under these unethical conditions? Do we really want to get rich quickly due to another people's suffering? We have has the slave trade, the sugar plantations in the West Indies, the exploitation of the poor by the rich in Africa, Venezuela, Argentina. We have technology to bring it to our very living rooms. Is it not time to swallow hard and do the decent thing - bring fraud policies in as compulsory, ethics policies for governments we trade with, laws and treaties that are joined up, and transparency for all. It is a big pill to swallow and a talking shop as this Ethics Forum was, is one step in the right direction, I believe.



ENDS.

[1] United Kingdom Department of International Development

[2] For a distinguished example of reporting on international affairs, including United Nations correspondence, Ten thousand dollars ($10,000). The article begins thus: -

*Day 1: Genocide's Child .**A mother struggles to love her child of rape*



_"Rwanda -- Gervais Tuyishime walks in from school. The 9-year-old boy drops his bag and shakes hands stiffly with his mother. Then he sits quietly on a wooden stool. No words are exchanged.
Most days are like that, says the mother, Alphoncina Mutuze. Her relationship with her son is an awkward one, characterized by bouts of anger out of proportion to the boy's perceived infractions, and frequently resulting in hard slaps to his face. On occasion, mother and child unexpectedly allow a hint of affection, and Mutuze embraces her only son, then quickly lets go, as if terrified of crossing a line she has willed herself to faithfully observe&#8230;&#8230;&#8230;."_



[3] See B.Black, R. Kraakman and A.Tarassova, 'Russian Privatisation and Corporate Governance: What went wrong?'(2000), 52 Stanford Law Review, 1731-1808. The academics' table of Russia's 'Kleptocrats' show them having holdings in LUK Oil, Subnet, LogoVAZ, AeroFlot and Transaero airlines, Gazprom gas company,Alfa Group, Alfa Bank, Tyumen Oil, Most Bank, Bank Menatep,etc.



See R.La Porta, 'The benefits of privatisation - evidence from Mexico', National Bureau of Economic Research,' (1997), Cambridge, Massachusetts.

 La Porta says privatisation gains can be distilled to be due to higher product price [10%], laid-off workers [33%] and productivity gains from residual workers [57%].



[4] Definition of Corporate Culture: '_A pattern of basic assumptions, invented, discovered or developed by a given group, as it learns to cope with its problems of external adoption and internal integration, that has worked well enough to be considered valid and, therefore, is to be taught to new members as the correct way to perceive, think and feel in relation to those problems. (Schein, 1990)._



[5] Enron 's auditors, Anderson, ignored Enron's dishonesty and manipulations in Enron's financial statements. The Prosecutor's report states that Enron 's was a culture of self-dealing and self-enrichment.

[6] Eurochambres, 'Companies need stronger EU-Western Balkans economic links', 22 September 2005, Brussels.



[7] A.F. da Costa, 'Benefits from Shareholders', Ekonomist Magazin, pp 16-17, September 05, 2005.

In this interview with the Ekonomist, Dr Costa said of Serbia: '..No doubt in Serbia a company is acting in a responsible manner in close cooperation with the Serbian Securities Exchange Commission and the Belgrade Stock Exchange Authorities as well as external auditors. However, related to the latter, I have to admit that certain auditor entities in Serbia apply procedures with a kind of an oversized 'local' approach rather than in accordance with international standards, namely the well-known IAS - International Accounting Standards'. [Jose Alexandre F da Costa is currently Legal Consultant in Business Law, Privatisations, Banking and Project Finance. One of the IFC, -World Bank s clients is *Tiger ad* from Pirot.



[8] This World Bank survey is a good thing. See also, Roberta Romano, 'Is regulatory competition a problem or irrelevant for corporate governance?'(2005), European Corporate Governance Institute, Professor Romano concludes that, in the USA, competitive federalism has been a resilient feature of United States corporate law, and is a benefit, not a threat as some believe, to good corporate governance.

[9] World Bank Report: http://www.worldbank.org.yu/WBSITE/EXTERNAL/COUNTRIES/ECAEXT/SERBIA&#8230;03/10/05



[10] See M.Patakyove, 'Review of Corporate Governance Principles in Slovakia', (2005),Comenius University Bratislavia, 

. There are good laws in places but sometimes vague, for instance, the Commercial Code does not regulate the number of board members.



[11] See R.T.Stroinski, 'Takeovers in Poland and the XIII EU Directive', (2005),British Institute of International Comparative Law Conference, 18th March.

 Poland has one of the largest stock exchanges in new accession countries. But it has concentrated ownership, consisting of new listings and institutional investors and a small amount of State and individual shareholdings. Poland's new takeover regulation includes increased duties to disclose acquisition and transfer of shares in 7 different thresholds, 5, 12, 20, 25, 33, 50 and 75%. Squeeze-out is applicable at 90% level. Also, there is no express reference to Board neutrality.



[12] The Economist, 'Finance and Economics', page 86, 4 December 2004.



[13] A.Wiget and O.Balaeva, 'Black Ice and Crimson Glow: Siberia and the Russian Far East '(2006), WebPages.


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