GOVERNANCE: How Is It Connected To Sustainability? Mr Thomas Thomas CEO, ASEAN CSR Network 1
Corruption stands in the way of Good Governance and Sustainability Globally, cost of corruption equals: More than 5% of global GDP (or US$ 2.6 trillion, World Economic Forum), with over US$ 1 trillion paid in bribes each year (World Bank) 10% of the total cost of doing business in many parts of the world 25% of the total cost of procurement contracts in developing countries 2
Business case for tackling corruption Individual Company Action Benefits of being clean Reduce the costs of doing business Attract investments from ethically oriented investors Attract & retain highly principled employees, improving morale Obtain a competitive advantage of becoming the preferred choice of ethically concerned customers/ consumers Qualify for reduced legal sanctions in jurisdictions like the US & Italy Risks of NOT being clean Criminal Prosecution, in some jurisdictions both at company & senior management levels which can lead to imprisonment Exclusion from bidding processes, e.g. for international finance institutions & export credit agencies Casino risk no legal remedies if a counterpart does not deliver as agreed and/or keeps increasing the price for doing so Damage to reputation, brand & share price Tougher fight for talent when hiring new employees Regulatory censure Cost of corrective action & possible fines 3
Business case for tackling corruption Collective Action by Business Benefits of being clean Create a level playing field overcoming the prisoner s dilemma Improve public trust in business Influence future laws & regulations Risks of NOT being clean Missed business opportunities in distorted markets Increased magnitude of corruption Policy-makers responding by adopting tougher & more rigid laws & regulations internationally, regionally & nationally Source: Clean Business is Good Business: The Business Case Against Corruption (International Chamber of Commerce, Transparency International, the United Nations Global Compact and the World Economic Forum Partnering Against Corruption Initiative, 2008) 4
Regionally, corruption is the biggest challenge in ASEAN Majority of the cases involved the private sector RANK COUNTRY SCORE 7 41 55 90 101 101 113 123 136 156 Singapore 84 Brunei 58 Malaysia 49 Indonesia 37 Philippines 35 Thailand 35 Vietnam 33 Laos 30 Myanmar 28 Cambodia 21 5
ASEAN businesses have not been forthcoming on their integrity-related disclosures 60% Overall level of disclosure on business integrity 57% 50% 40% 39% 40% 43% 47% 45% 30% 20% 10% 0% Average level of disclosure rate per country Average level of disclosure rate across 5 countries 6
Singapore seems to be performing better, but not an exception 90% of the cases investigated by CPIB involved the private sector 7
ASEAN Leaders are committed to fight against corruption in the ASEAN Community: Instill the culture of good governance [ ] enhance transparency, accountability, participatory and effective governance (A.2.2) Instill the culture of integrity and anti-corruption (A.2.3) (ASEAN Political-Security Blueprint 2025) 8
Singapore companies need to play their part Companies need to focus on business integrity as an essential feature of good governance A culture of integrity shall apply whether companies are operating in Singapore or abroad - Integrity Has No Borders 9
Tools for Integrity 10
Integrity should be on the table in the Boardroom The board of directors, as the apex governance body, sets the tone for management, employees and other stakeholders on the culture of integrity. Directors can combat corruption by: Ensuring that they & the management leadership set the example for anticorruption in all of their communications, decisions and actions; Identifying the risks of corruption and implementing and maintaining policies and practices that counter corruption and extortion; Being committed to the implementation of anti-corruption policies, notwithstanding the short term losses; Supporting and training employees and representations in their efforts to eradicate bribery and corruption and providing incentives for progress; and Ensuring a sound whistleblowing policy for reporting violations without fear of reprisal. 11
Regional Business Integrity Pledge The Regional Business Integrity Pledge is a voluntary document that allows a company or an organisation to make a commitment to uphold ethical values at the enterprise/organisation, national and regional level. The Following Groups may sign the Integrity Pledge: Companies/Private Sector Governments/Public Sector Civil Society Organisations International Agencies Others Download the Pledge at www.integrityhasnoborders.com 12
THANK YOU 13