Integrity Summit: Are we serious?

Michael Alan Hamlin

Posted on October 2, 2011

“We need,” President Benigno S. Aquino III told some 300 delegates attending the “Integrity Summit” last week, “to foster integrity in both government and the private sector.” While business executives across Asia—not just the Philippines—regularly complain about corruption, Mr. Aquino appeared to suggest that business executives in the Philippines do more than complain, and refrain from succumbing to temptation.

The executives present are already doing that either out of moral outrage, fear of prosecution, or having been found out and publicly punished. Frank Schmidt, vice president and compliance officer in Asia and Pacific for Siemens, bravely represented companies in that last category. In 2008 and 2009, Siemens was fined $1.6 billion by the U.S. Justice Department, Securities & Exchange Commission, and German authorities for engaging in corruption.

The record fine was much smaller than the $5 billion Siemens originally feared it would have to pay. The company got off for much less because it cooperated with investigators. The scope of Siemens’ depravation was breathtaking. From 2001 to 2007, the company maintained a slush fund totaling €1.3 billion. So engrained was the practice of bribing government officials in the Siemens culture that one observer noted, “At Siemens, corruption was just a line item.”

Siemens subsequently announced that it had uncovered other corrupt practices in Africa, demonstrating that internal controls put in place in 2009 were effective in exposing illegal acts committed by its executives. The message was that corruption was not just unacceptable business practice. The company would cooperate with government regulatory authorities to prosecute executives who bribe government officials.

“Just don’t do it,” was the message Mr. Aquino seemed to want to communicate to the suits in the summit audience. Delegates present appeared receptive, and they stayed on for afternoon panels in which their counterparts in a variety of industries—from broadcast to IT-BPOs—explained how their companies reign in corrupt practices. The information was useful to many perhaps, but speakers were preaching to the choir.

Executives in about 500 companies signed an “Integrity Pledge” leading up to the summit. While that’s an impressive number in a business community in which IT-BPO firms are among the largest companies in the country, it’s pretty obviously a fraction of the executives who are in a position to offer or resist bribes—which is essentially every businessperson and every adult in the Philippines when we consider how engrained petty corruption is in daily life.

But we are not alone in that respect. The results of this year’s ASEAN Outlook Survey—participated in by member executives of US Chambers of Commerce—shows that corruption is a dreadful problem throughout the region. Yet it apparently doesn’t much affect investment. Respondents working in Indonesia for example revealed “major concerns with corruption, laws, and regulations.” Laws and regulations often exist to facility bribery, not prevent it.

Despite the respondents’ concerns, however, “Indonesia was the most popular destination for US companies to expand, with 72% of respondents reporting that their company was planning to expand there.” Vietnam was the “second most popular location of US investments,” although it was a far second compared to Indonesia with just 25% of respondents saying they intend to expand. Corruption was also cited as a major impediment to business in Vietnam.

The region’s most dynamic economies, however, appear to have largely eliminated corruption, or made significant progress addressing it. In Singapore, corruption didn’t register for respondents. In Malaysia, “corruption, a long-standing issue, has greatly improved, with only 35% dissatisfaction this year compared to 63% in 2010.” These examples seem to suggest that at least within ASEAN, countries with the strongest economies effectively address corrupt practices.

Looking outside ASEAN quickly shows that’s not really the case, however. China has a booming economy, but profligate corruption is pervasive. South Korea, Taiwan, and Japan grew fastest when corruption was widespread. Each of those countries has convicted former heads of state for corruption, but only after achieving developed-economy status. Perhaps it is only then that governments have the resources and the political will to meaningfully fight corruption.

Or perhaps it is when citizens are no longer starving that they have the energy to give voice to their rage.

This week, Mr. Aquino is championing good, transparent government at the launch of the Open Government Partnership (OGP) in New York. The Philippines is one of eight nations on the OGP steering committee. “Integrity doesn’t end with a pledge,” Aquino told summit delegates last week, an observation he is likely to repeat this week. “Now we are obliged to live up to this pledge.”

That surely means prosecuting erring government officials with outstretched hands and conspicuously open drawers, but business executives, too, who shake the hands, and fill those drawers.

(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author. His latest book is High Visibility: Transforming Your Personal and Professional Brand. Write him at mahamlin@teamasia.com and follow him on TwitterFacebook and LinkedIn. Copyright © 2011 Michael Alan Hamlin. All Rights Reserved.)

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