Arif Zaman, Adviser, South Asia and Corporate Governance

1
Multi-national businesses as catalysts of
economic development in Commonwealth countries -
myth or reality?

• Arif Zaman, Adviser, South Asia and Corporate
  Governance
• Commonwealth Business Council
• Commonwealth Countries and
• Corporate Social Responsibility
• Commonwealth Policy Studies Unit
• London 16 July 2008

2
Meta drivers

• Trust under pressure customers, employees,
  shareholders, communities and citizens
• an intensification of human security (cf.
  separate work led by policy-makers in Japan and
  the UN in 2003 and the UK in 2005 and by the
  Commonwealth in 2007)
• the need for fairness and inclusiveness as
  globalisation in the gathers pace
• the role of the indigenous as well as the
  international private sector in economic, human
  and social development
• the untapped potential of productivity in Europe
  and Asia as a quality of life approach

3
10 problems with Corporate Social Responsibility
today

• Reputational risks of CSR advocates
• A lack of understanding of how corporate
  governance links to CSR
• A lack of understanding of what CSR means and
  how it is perceived outside a European / North
  American / Christian context
• A weak understanding of the dynamics of
  international trade and how diversified exports
  from developing countries for supply chains of
  global companies can contribute to SME
  development and poverty alleviation
• Weak connection between CSR efforts and impact on
  human security
• A lack of a sectoral specific context
• A lack of an explicit focus on productivity
• An insufficient focus on capacity-building,
  training and development, especially in
  developing countries
• An industry which has issues with training,
  quality, transparency, and measurement
• A need to re-orientate by 2008 (ISO 26000 MDGs
  mid-point TICAD and G8 in Japan)

4
What is CSR?

• Business behaviour
• that generates the
• commitment and trust
• of key stakeholders

5
corporate social responsibility

• The Board is committed to and promotes corporate
  social responsibility on paper and in practice.
• Local laws and tax rules are followed.
• Stakeholders opinions are taken into account
• There are high labour standards and measures to
  protect the environment coupled with capacity
  building
• economic, social and environmental performance
  and impact, is monitored and reported to the
  public
• There is a high standard of employee training and
  steps aimed at raising awareness of the companys
  responsibility

6
CBC Business Principles
Core values - honesty, integrity, respect,
sustainable development Duties/ responsibilities
to stakeholders - shareholders, customers,
employees, suppliers, society Principles - human
rights, fair competition, no bribes, no conflicts
of interest, HSE, communities, communication,
compliance
7
Corporate Citizenship bringing together
corporate governance and social responsibility

• Corporate governance and corporate social
  responsibility now feature at the top of the
  business agenda.
• The CBC has been working to strengthen these
  areas in the belief that responsible business
  practices will make globalisation work more
  effectively for all.
• A number of CBC member companies are leading
  exemplars of good corporate practice

8
Context for Achieving Corporate Citizenship

• Market system, business is the best advocate, and
  needs a clear conscience to do so
• Profitability still central, otherwise business
  is not sustainable
• Clear, ethical values
• Communities, first immediate ones, and then
  society as a whole
• Sustainable Business Solutions
• Good communication clear, consistent, coherent
  and honest

9
Commonwealth Guidelines for Corporate Citizenship

• Values
• Corporate Governance
• Relationships
• Impacts
• Implementation

10
Commonwealth Guidelines for Corporate Citizenship

• Values
• Core Values
• Transparency
• Tackling Corruption
• Human Rights

11
Commonwealth Guidelines for Corporate Citizenship

• 2. Corporate Governance

12
Commonwealth Guidelines for Corporate Citizenship

• 3. Relationships
• Customers
• Shareholders
• Suppliers
• Investing for the Long Term
• Local Communities
• Government
• Other Stakeholders

13
Commonwealth Guidelines for Corporate Citizenship

• 4. Impact
• Environment
• Consumer Awareness and Product Impact
• Building Capacity in host communities
• Impact on other species

14
Commonwealth Guidelines for Corporate Citizenship

• 5. Implementation
• Standards
• Support for SMEs
• Corporate Social Investment
• Sharing Best Practice

15
Corporate Citizenship Putting Business
Principles into Practice

• Not all good corporate citizens will be at same
  stage in all aspects
• Practicalities of implementation will vary from
  company to company
• Implementation within the company as well as
  externally directed

16
Creating Sustainable Business SolutionsCASE
STUDY Tackling Corruption

• Background
• Operations in 100 countries
• Company policy instructed that
• No undisclosed account should be maintained
• Bribes or other improper advantages for business
  or financial gain should not be given or
  received, whether directly or indirectly
• No employee will suffer for reporting any breach
  of the code

17
Creating Sustainable Business SolutionsCASE
STUDY Tackling Corruption (contd)

• Local management performance will not be affected
  as a result of loss of business by adhering to
  the code
• Yearly assurance by Chairman that the Code is in
  effect and business is in compliance
• Board is responsible for ensuring these
  principles are communicated to, and understood
  and observed by, all employees.
• Short term cost, but long term gain

18
Creating Sustainable Business SolutionsCASE
STUDY Human Resources

• Background
• HIV/Aids epidemic affecting between 25 and 28
  million people in the Sub-Saharan region
• Choice between ignoring the plight of employees
  and future employees or doing something proactive
  about a serious problem
• First company to adopt health insurance for
  HIV/AIDS
• Provides Education, prevention, treatment
• Provided education, prevent and treatment for
  employees at first and then expanded to
  surrounding community
• Top down decision making - board took leadership
  role
• Impact Healthier employees, happier employees,
  more productive

19
Creating an Enabling Environment for Corporate
Citizenship

• CBC Joint Action Plan for Business and
  Governments Enabling Corporate Citizenship for
  Sustainable Development (CHOGM, December 2003)
• CBC Working Group Report focusing on Health in
  the Workplace and Community Education and Skills
  Development Support for SME Development

20
Stewarded by Standing Committee on
CSRFederation of Pakistani Chambers of Commerce
and Industry (FPCCI)
Pakistan Competitiveness and Compliance
Initiative (2008)
21
PCCI Goal

• Create consolidated compliance platform for
  export industries
• Pilot Industry Value-added Textile Industry
  (based on its export revenue impact size)

22
The Real Challenges of the Next Decade

• How can boards of Good Corporate Citizens direct
  their companies to
• define, develop, and deliver sustainable business
  solutions?
• build new conversations and relationships with
  communities including consumers, customers,
  employees, suppliers, NGOs?
• Recognise, facilitate and drive links between
  diasporas, diversity and development (connecting
  minorities and diversity to the CSR agenda)
• create enough value and wealth to meet the needs
  of nineten billion people?
• create a competitive environment internally and
  externally for socially responsible activities?
• not be overwhelmed by an over-emphasis on
  corporate governance regulations - to the point
  of it affecting enterprise and innovative
  initiatives?
• most critically, economically empower the
  communities they work in?

23
What happens to the poorest citizen in the
poorest country can directly affect the richest
citizen in the richest country and as individuals
and nations we are dependent upon each other for
our security and prosperity
A Commonwealth HOGs View
Gordon Brown, Chatham House, 22nd January 2003
24
Ensuring that Britains Muslim communities are
not socially excluded will continue to be an
important issue
Source Strategic audit of UK (DTI, 2003)

• British Pakistanis and Bangladeshis worse off
  than other ethnic minority groups in terms of-
• Education
• Employment
• Health
• Source various 2000-7

25
contemporary questions (ODI)

• Can the competitiveness of a corporation be
  enhanced by strategic alignment of its operations
  with a countrys economic development priorities?
• How can direct competition between firms be used,
  instead of regulation or common voluntary codes,
  to enhance multinationals contribution to
  economic development?