Middle East | Integrity
Championing integrity in Gulf countries
A new voluntary initiative is setting the benchmark for honourable business Throughout my career as a legal counsel and now as head of a Gulf-led, non-profit organisation that promotes transparency and accountability as a measure of business competitiveness, I have often seen the word integrity make its way in to conversations.
Carla Koffel
Executive Director, Pearl Initiative story is not very different internally. Domestic investors frequently face obstacles obtaining key information regarding the ownership, performance and the business integrity of their partners, suppliers and customers. From a policy standpoint, the decade-long deliberations on the need for integrity have culminated in serious action in the Gulf, especially now as governments in the region are seeking to transition from the public-sector led development model towards private sector-led development.
More often, integrity appears to be unequivocally a fundamental measure of the way people do business, both in this region and across the world. That said, if you scratch the surface, most corporate leaders would agree that while integrity More action needed means good business, it can often be While most Gulf countries have general considered a nice-to-have rather than a anti-corruption provisions in their penal sustainable long-term business requisite. codes or other criminal legislation, some It helps to have perspective in this instance. countries in the region have passed additional There is a lot of money to be lost with the specific legislation criminalising bribery. deterioration of integrity and growth of These laws have been crucial in expanding corruption. The World Economic Forum the scope and definition of transactions estimates that corruption increases the cost of considered as bribery with criminal doing business by up to 10 per cent on average. implications, as well as in setting out At a more human level, the value of integrity more significant sanctions for the rises as we see a millennial and Gen Z influx breach of these laws. For instance, in in to the workforce. As the 2017 Deloitte the UAE, the revision of the Millennial Survey confirms, Federal Penal Code in 2005 today’s growing young workforce Corruption: resulted in the criminalisation is most motivated to work with Behaviour of bribery in the private sector, companies that put a culture on the part impressing a greater ethical of trust and integrity at the core of officials in drive in the market. of their operations. Nevertheless, the position Across the Gulf region, efforts the public and of the Gulf countries on to improve and formalise private sectors, international business integrity processes around corporate in which they and anti-corruption rankings integrity, corporate social improperly and highlights the need for greater responsibility and corporate governance have been ongoing unlawfully enrich action to implement effective integrity measures. This view for more than a decade. However, themselves was mirrored at the Pearl they have gained further urgency and/or those Initiative and United Nations in the current low oil price Global Compact annual forum, environment where companies close to them, ‘Sustainability in Action: Business are increasingly looking for or induce and the UN Global Goals’, held in foreign capital opportunities. others to do October 2016, which saw more Yet, foreign investors are so, by misusing than 700 public and private sector often held back by the lack representatives examine the of transparency or access to the position role of the Gulf private sector sufficient information and in which they in advancing the Sustainable knowledge about the Gulf are placed Development Goals. Notably, corporate sector as a potential partner, client or supplier. The OECD Glossaries 78 per cent of the participants at 24 Ethical Boardroom | Summer 2017
the forum’s session on the role of integrity in fostering secure and peaceful communities felt that right business conduct was integral to ensuring peace and stability in the region. A majority of respondents also agreed that Gulf businesses understand, in varying degrees, the business case for integrity and anti-corruption practices. However, compared to this, close to 55 per cent of those surveyed agreed that regional businesses did not have adequate measures in place to manage risks associated with regional instability, pointing to a clear gap in building integrity in to the corporate fundamentals.
The business case for integrity
Besides the inherent benefits of clean business practices, integrity levels are clearly correlated with better economic performance. Understandably, the UAE, which ranks the highest in the region in the World Bank’s ‘Doing Business’ index, has improved its economic landscape through better checks and balances in the business sector. Emphasising this point, a 2016 IMF report clearly shows that investment in corrupt countries is almost five per cent less than in their peers which are relatively not corrupt. Responding to this reality, the region is seeing a greater thrust towards integrity, moving from mere lip service to time and fund investments to root out corruption. In recent times, for example, corporate spending on integrity practices has seen an increase, with an OECD survey indicating that 80 per cent of respondents confirmed that their company’s board was strongly involved in the design and implementation of their company’s integrity policy. Close to 20 per cent of respondents estimated integrity budgets to have increased by 25 per cent to 50 per cent over the last five years.
Going beyond policy and regulation
With the growing body of knowledge on the advantages of integrity within business, it becomes more and more apparent that real change can only be possible if the corporate sector takes a more introspective role in effecting clean business. While strict legal measures can complement such actions, fundamental breakdown of corporate governance can be extensively damaging, www.ethicalboardroom.com
