Governance & Integrity Systems The World Bank Core Course on Governance and Anticorruption PRMPS,...

Governance & Integrity SystemsGovernance & Integrity Systems

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Core Course on Core Course on Governance and Governance and AnticorruptionAnticorruptionPRMPS, WBIGP & INTPRMPS, WBIGP & INT

Presented by:Presented by:

Bob BarnesBob BarnesConsultant, ECSPEConsultant, ECSPE

February 15, 2005February 15, 2005Presented to:Presented to:

Governance & Anticorruption Core Course 2The World Bank

Why Does Good Governance, Why Does Good Governance, Ethics and Integrity Matter?Ethics and Integrity Matter?

The high correlation between good governance and the effectiveness of developmental assistance

• The principle of conditionality

• The principle of selectivity


Why Does Integrity Matter?Why Does Integrity Matter?

High levels of unethical and corrupt behavior in a country’s public and private sectors deter Foreign Direct Investment (FDI) and inhibit growth

The ethical reputation of companies as a growing investment factor – after the Enron disaster, this trend is likely to grow even stronger


Why Do Ethics and Integrity Why Do Ethics and Integrity Matter?Matter?

Public confidence in government is key to a stable, functioning democracy

Unethical behavior in the public sector seriously undermines public confidence


Ethics and Values – What Are Ethics and Values – What Are They?They?

One practical definition of ethics: that set of criteria or principles a person uses when selecting a course of action in the face of competing values

Values can be ethical values (truthfulness, respect for others) or ethically neutral values (ambition, wish to be respected, desire for wealth, etc)*

*Making Ethical Decisions, The Josepheson Institute of Ethics


Universal ValuesUniversal Values

Descriptive values – the way things are• Vary from country to country, company

to company, organization to organization, and person to person

• No country has a monopoly on virtue• Political scandals in the West• Enron, Arthur Anderson, many others


Universal Values and EthicsUniversal Values and Ethics

Aspirational values – the way things should be• Aspirational values vs Culture – the

myths of “that’s the way things are done here (or there)”

• Core aspirational values are widely shared across religions and cultures


Ethical DilemmasEthical Dilemmas

A true ethical dilemma occurs when one is faced by conflicting ethical values• Honesty vs. Kindness (the white lie)• Compliance with procedures vs. Justice

• An unknowing ethical dilemma occurs when one is faced by conflicting values, but does not realize it• The value of ethics training



A false ethical dilemma occurs when a person is faced with a choice between an ethical value and an ethically neutral or even unethical value• Honesty vs personal success

• The key false dilemma in Enron?

Governance & Anticorruption Core Course 10

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Unethical behavior occurs when a false ethical dilemma is resolved in favor of the ethically neutral or unethical value• Lie to make yourself look better, gain

wealth, or shift blame

• The key question: Cui Bono? (Who benefits?)


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The Goals of a System of EthicsThe Goals of a System of Ethics

Clearly define the aspirational values (the ought)

Examples of Codes of Conduct/Ethics• The World Bank Code of Professional Ethics• Institute of Internal Auditors• International Chamber of Commerce Rules of Conduct

to Combat Extortion and Bribery• www.iit.edu/departments/csep/PublicWWW/ Contains links to codes and other ethics resources on-

line


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Align descriptive values (the is) with aspirational values (the ought)

Mechanisms• Guidance/training• Compliance enforcement• Positive incentives


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Minimize ethical dilemmas

Mechanisms• Adjust criteria for success – remove

pressure to be unethical• Transparency of interests• Internal mechanisms for advice


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Provide a framework for resolving ethical dilemmas that do occur

Mechanisms

• Ombudsman• Secure channels for reporting misconduct• Effective “no retaliation” protection for

whistleblowers


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Two Approaches to Attain the Two Approaches to Attain the Goal*Goal*

Compliance-based ethics management• Extensive and detailed mandatory rules

• Prescriptive (you must)• Proscriptive (you must not)

• Extensive investigation and control mechanisms

• Penalties for non-compliance


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Two Approaches to Attain the Goal*Two Approaches to Attain the Goal*

Integrity-based management• General statements of ethical values• Professional socialization• Incentives for ethical behavior• Internal mechanisms for help and advice

Which is the correct approach?

*Janos Bertok, SIGMA Public Management Forum IV, No.1, 1998


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The Ultimate Compliance-Based The Ultimate Compliance-Based System? System?

“Everything that is not prohibited is mandatory, and we are watching you at all times.”• Would you want this system?

• Could an economy survive this system?


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Is Integrity-Based Ethics Is Integrity-Based Ethics Management Sufficient?Management Sufficient?

“If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.”

James Madison, The Federalist Papers No. 51


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Ethics Management SystemsEthics Management Systems

The answer: Both are required

The challenge: finding the right balance


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Elements of An Ethics Elements of An Ethics Infrastructure*Infrastructure*

• Political commitment

• An effective legal framework

• Efficient accountability mechanisms

• Workable codes of conduct

*OECD, Public Management Occasional Paper No. 14


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Elements of an Ethics Elements of an Ethics Infrastructure*Infrastructure*

Professional socialization mechanisms, including training

Supportive public service conditions An ethics coordinating body An active civic society, including the media

*OECD, Public Management Occasional Paper No. 14

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OECD Principles for OECD Principles for Managing Ethics in the Managing Ethics in the

Public SectorPublic Sector

An Example of an Ethics Framework


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Principles for Managing Ethics in Principles for Managing Ethics in the Public Sector*the Public Sector*

Ethical standards for public service should be clear

Ethical standards should be reflected in the legal framework

Ethical guidance should be available to public servants

*OECD, PUMA Policy Brief No 4


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Principles for Managing Ethics in Principles for Managing Ethics in the Public Service*the Public Service*

Public servants should know their rights and obligations when exposing wrongdoing

Political commitment to ethics should reinforce the ethical conduct of public servants

The decision-making process should be transparent and open to scrutiny

*OECD, PUMA Policy Brief No. 4


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There should be clear guidelines for interaction between the public and private sectors

Managers should demonstrate and promote ethical conduct

Management policies, procedures and practices should promote ethical conduct

*OECD PUMA Policy Brief No. 4


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Public service conditions and management of human resources should promote ethical conduct

Adequate accountability mechanisms should be in place within the public service

Appropriate procedures and sanctions should exist to deal with misconduct

*OECD, PUMA Policy Brief No. 4

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Ethics and LeadershipEthics and Leadership

The Indispensable Element to an Ethical Organization


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“What executives do, what they believe and value, and what they reward and whom, are watched, seen, and minutely interpreted throughout the whole organization. And nothing is noticed more quickly - and considered more significant - than a discrepancy between what executives preach and what they expect their associates to practice.”

-- Peter Drucker


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Responsibilities of LeadershipResponsibilities of Leadership

Establish the values, and the hierarchy of values – much more than compliance rules• Involve the entire staff in doing so

• Many things are compliant and legal, but still are wrong

• Values will let the organization choose to be right, not just “legal”

Scrupulously honor the values in your own conduct


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Responsibilities of LeadershipResponsibilities of Leadership Communicate the values to everyone

• Insist that your people really do know the rules and values

• Provide the resources (time and money) for training

• Provide effective means for people to get reliable and useful advice and guidance anonymously

• The most effective communication is to reward ethical behavior


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Establish a “complaint friendly environment”• Punishing the bearer of bad news just means

you will not hear what you need to hear• Provide secure, reliable, and anonymous means

for staff to report impropriety• Follow up on all reports of impropriety• With due regard to privacy, publish the core

facts of cases of substantiated impropriety


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Responsibilities of LeadershipResponsibilities of Leadership Be intolerant of unethical behavior, but

allow people who commit minor improper acts to survive and succeed• Avoid a “cover up at all costs” mentality• Give due credit for self-reporting• Never make perfection the only acceptable

standard Bad news uncovered and reported

immediately is always better than bad news covered up and discovered later


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NEVER impose requirements, or accept tasks, that cannot be met without violating the values• Your responsibility is to know when you do

that – avoid “convenient ignorance”• You must be willing to hear and accept “no”

from your subordinates• You must be willing to say “no” to your

superiors, even if it makes you look bad

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The Lessons of EnronThe Lessons of Enron

A Parable on Ethics


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The Lessons of EnronThe Lessons of Enron

Thoughts on some of the causes of, and lessons from, the Enron meltdown

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Tools, Resources, and InitiativesTools, Resources, and Initiatives

A (Very) Partial List


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IMF Code of Good Practices on Fiscal Transparency

Key recommendations of the IMF to ensure transparency in fiscal transactions in the public sector

Transparency is perhaps the most important element of an ethical system

Text included as handout; also available at www.imf.org


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IMF Questionnaire on Fiscal IMF Questionnaire on Fiscal TransparencyTransparency

Very detailed questionnaire (37 pages) • Provided as a handout

Also available at www.imf.org

Designed for self-assessment by government finance officials

Relates back to the IMF Code of Good Practices on Fiscal Transparency


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Other ResourcesOther Resources

OECD Principles of Corporate Governance• Provided as handout• Available at www.OECD.org

Convention on Combating Bribery of Foreign Public Officials in International Business Transactions• Available at www.OECD.org


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Wolfsberg Anti-Money Laundering Principles• Group of major international banking firms

• Available at www.wolfsberg-principles.com

International Chamber of Commerce, Rules of Conduct to Combat Extortion and Bribery• Available at www.iccwbo.org


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Transparency International Source Book 2000, Combating Corruption: The Elements of a National Integrity System• Available at www.transparency.org• Contains detailed information on anti-

corruption initiatives world-wide• Contains extremely useful “Best Practices”

Annex


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Other Resources - TrainingOther Resources - Training European Institute of Business Ethics “Dilemma

Training Device”• Training on detecting and resolving ethical dilemmas

• Information available at www.nyenrode.nl/research/eibe

World Bank Institute• Many training resources on Corporate Governance and

Business Ethics

• Information available at www.worldbank.org/wbi


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