3rd Annual Christopher Kolade Lecture On Business Integrity

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Beyond Compliance: Imbibing A Culture Of Business Integrity

REMARKS BY HIS EXCELLENCY, PROF. YEMI OSINBAJO, SAN, GCON, VICE PRESIDENT, FEDERAL REPUBLIC OF NIGERIA, AT THE 3RD ANNUAL CHRISTOPHER KOLADE LECTURE ON BUSINESS INTEGRITY IN LAGOS, JUNE 25, 2015.

PROTOCOL

This short contribution to the topic – “Beyond Compliance: Imbibing a Culture of Business Integrity’ does not attempt a scholarly analysis of how individuals or corporate entities may develop a ‘culture’ of business integrity. Such an approach will require far more time and rigour than is available on this occasion. But more importantly, it will not satisfy me, so I have decided to interrogate an aspect of the problem of “developing a culture of integrity” – which concentrates on how our desires to moral or ethical dilemmas determine our integrity profile.

In doing this, I go beyond the concept of “ business integrity”. Indeed, the idea of business integrity as a distinct concept deserves further clarification. In my view, it is an expression coined merely to provoke focus within the general context of a discussion on integrity. Real integrity is all-pervasive.  A man cannot lack personal integrity and at the same time have business integrity. Neither can he exhibit business integrity when other aspects of his life are corrupt. One of the qualities of integrity to stress is, therefore, its consistency. Integrity is integrity. It should not change with the role of the man or woman, whether as a parent, a teacher, a businessman, a policewoman or a politician. Rather, integrity must reflect in a person’s behaviour, irrespective of the role he finds himself playing at a particular time. At the level of a society or nation, the same applies. Real integrity demands that all facets of the group’s life are consistently imbued with the same principles of integrity.

In a sense, this universality imports the consequence that integrity is as much an accepted standard as it is an aspiration. As human beings, we must admit the possibility of occasional failings or infrequent episodes of poor judgment; even more so a group or community level. However, in order for him not to relegate the quality of integrity, it must remain an accepted goal or aspiration of the individual and one which he commits himself to uphold at all times.

In this regard, we may appear, at first blush, to do much better at the group or organisational level. An entity may leave less to chance than an individual concerning its established standards of integrity. A company, for instance, can fashion out a comprehensive code of conduct, articulate same in a written document and insist on compliance by its directors, managers, employees and customers. It can also set up a supervision system and sanction acts of infringement. This is seen even more clearly at the level of a State, where some acts or omissions are condemned as offences, attracting heavy sanctions of compulsory labour, imprisonment or even the death penalty.

In between are several regulations set directly by the legislature or by the executive under delegated authority. Such regulations generally affect business operations, the stock market, land transactions, court proceedings etc. Taken together, these laws and regulations are so many and often complex, compelling a lot of companies now employ compliance officers to guide their managers and employees concerning the way to ‘fulfil all righteousness’ or achieve formal compliance with the prescribed standards of behaviour.

Most societies, including those perceived as corrupt or very corrupt, have this comprehensive array of regulations. However, while it is a truism that where there are no rules, there can be no infringements, it is equally indisputable that the magnitude of integrity displayed by members of a given society or business undertaking is not necessarily reflective of the copiousness of its regulations. What is decisive is the extent of commitment and compliance.

In the end, no matter how thoughtfully drawn up a code of business ethics is, the acts can only become “cultural”  or “normal when the individuals who constitute the group or society to which the code belongs, develop a consistent pro-group approach to the resolution of “ethical dilemmas”.

Put differently, unless individuals within a group or society make the right ethical choices consistently, it’s impossible to develop a “culture” of integrity.

What is an ethical dilemma – let me pose a few scenarios to illustrate.  I have taken these examples from Vault Rankings & Previews.

Scenario 1: You discover that your immediate supervisor is taking kickbacks. He is a good man and you have become family friends over the years.  The conflict is between your loyalty to your boss and friend, and your commitment to the greater good of the company.  The greater good of the company means the greater good of many in the company and their families.

Let me assist in resolving this dilemma for those who may have difficulty:

  1. You may do nothing – silence keeps your friendship. You cannot betray a friend.
  2. You report him – this wrongdoing could affect everyone if not checked and could jeopardize the future and reputation of the company.
  • You decide to confront him directly demanding an end to his wrong behaviour – you give him a chance to mend his ways.

Which expands the notion of “business integrity” to emphasize the duty of the corporate organisation to ensure trust in its practices.  It consciously and consistently focused on “public good”.

Integrity is not just compliance, it is imbibing a higher moral code, one which holds us as a part of the whole responsible for playing our part in the betterment and advancement of the whole. To further set the context – two major related ills confront our society – Poverty and Corruption.

110 million Nigerians live in conditions of extreme poverty.  Its implications are grave.  It accounts for the high illiteracy figures and shocking infant and maternal mortality rates.  It is the reason why over a million Nigerians die yearly of preventable causes.

Corruption, on the other hand, is perhaps the single most potent cause of poverty.  The systematic stealing of the commonwealth by a few individuals – in public and private sectors.  The loose cabals and cliques of local and foreign individuals and entities that have found various ways of attacking the nation’s resources for personal benefits.

The truth is that the greatest threat to the stability of the republic is chronic poverty and corruption.  When large swathes of the population are excluded and have no stake in society, society is endangered.  Where public and private institutions are weak and compromised on account of corruption, then the battle to save the polity is a tough and arduous one.  But my question is, how do we respond to the ethical dilemma of poverty amidst mind-boggling wealth?  How do we respond to the ethical dilemma of corruption especially when it concerns those of our friends, ethnic or religious groups denominations? Why is it that wrong-doing is not so wrong when it is done by a member of my church or my tribesman?

Regarding the question of what to do about the poor, permit me again to borrow one of the more popular illustrations of ethical dilemmas, the often-referenced Parable of the Sadhu. This simple narrative reveals profound truths that affect our daily lives, be it in Statehouse or the Boardroom.

In a moving article, which received the Harvard Business Review’s Ethics Prize in 1983, Bowen McCoy, a managing director of the Morgan Stanley Company related how he and his party, en route the Himalayan peak, found a pilgrim, or Sadhu, dying of cold. Sadhus, meaning holy men in Hindi, roam the countryside of India and Nepal, begging for food. Although the climbers stopped to help the Sadhu for a moment, Mr McCoy and his team ultimately pressed on with their trek, determined to reach the summit. This unexpected ethical dilemma left them questioning their values, and the values of the business, which may place goal achievement ahead of other considerations.

Allow me to add some twists to the narrative.  Some in the climbing party could have imagined- without stopping at all, focused on reaching the summit. The government should help this Sadhu, but it does nothing. Some others would imagine, where are the religious groups and civil society groups? Can’t they be more charitable? This presents us another challenge,  the responsibility dilemma.

While the government is ultimately responsible to its citizenry in a more profound and direct manner than business, civil society organisations, religious associations or any other social actor, I dare to say, that a sustainable future is only possible through building and functioning in an integrated responsibility ecosystem.  A system where everyone takes ultimate collective responsibility for the Sadhu. A system where each actor does their bit and not just so long as it is not too inconvenient. I’m talking about a system where everyone will not just pass the buck to someone else and take off.

Before you allege that Government is passing the buck, I will provide a background of my personal philosophy on corporate leadership and also articulate the vision of President Muhammadu Buhari’s administration in building a fair and inclusive Nigerian enterprise.  An enterprise that is fair to the vast majority of Nigerians, numbering in their tens of millions, who cannot interact with a decent daily existence. Education, healthcare, housing and other parameters of well-being remain a mirage for these Nigerians who are our Sadhus saddled with poverty as some of us trudge ahead to our summits.

Co-founding the Convention of Business Integrity many years ago, we always knew that corporate leadership based on ethical values was not only the right thing to do, but it was also the truly sustainable means to enhance stakeholder value. For us, the corporate world could reflect and project an ethics-based leadership model for society to follow. Since then, the CBI has surged ahead with its commendable task of advocacy and action, and we have seen the introduction of ethics in the Code of Corporate Governance. Beyond the Code of Business Integrity, public companies today are required to adhere to certain ethical principles that have become codified within our regulatory framework.  But is compliance with prescriptive codes all that there is to the matter?  Does the corporate world link its corporate strategic objectives to the Nigerian Sadhus as a matter of design and business case?

Sadly, there are far too many Sadhus roaming hopelessly along Nigeria’s path to greatness. We will change this narrative, primarily by including large swathes of our population into an ecosystem where deprived and enterprising women can secure credit; an educated and informed future where our children will compete with their global peers; an assurance of a healthy life where preventable diseases do not dominate the headlines; a life with rooftops over the heads of many; a breakaway from unproductive engagement for the millions of our young and restless; and ultimately a social safety net that catches the vulnerable, weak and helpless from a despondent fall where they are currently destined.  If we achieved only but a measure of our aspirations, then we would have laid the critical foundation for a sustainable future for generations to come.

But this last piece of insecurity is not the government’s responsibility alone.  I sincerely hope that corporate leadership identifies that the systemic empowerment of Nigeria’s Sadhus is an ongoing commitment which should derive both from economic self-interest (that is, a solid business case) and from ethical grounding (that is, the moral importance of sustainable development). There is growing acceptance of the view that businesses can create value by better managing natural, human, social and other forms of capital. The performance of companies must be interrogated from a perspective that recognizes these other forms of capital.

Looking after the people and the community as well as the environment are all relevant to long-term business survival and bigger markets.  There is no point in vacillation or taking a solely philanthropic view of corporate social responsibility. CSR commitment requires businesses to take an active role in poverty reduction efforts. This demands more explicit acknowledgement of poverty in corporate citizenship and for corporate leadership to name the issue and frame it in such a way as to accelerate its reduction. Companies must push to seek something other than the lowest short-term cost for the highest short-term gain. By serving the poor, businesses can gain new sources of revenue growth and greater efficiencies with cost reduction initiatives, which also translates to increased purchasing power for local consumers.

Businesses must begin a paradigm shift from the CSR viewpoint that is predictably philanthropic in nature, responding to perceived individual needs of a locational or issue cluster. Rather, businesses must begin setting up target strategic interventions to improve overall sustainable livelihood at the community level. While the basic purpose of a company remains the creation of wealth, social conscience mu6st be seen as compatible and complementary to it.

This paradigm shift to sustainability can be modelled on three principles – creativity, scalability and responsiveness. Although business can be creative and innovative, the responsibility imperative to our Sadhus is that business creativity needs to also be directed to solving Nigeria’s social problems. For instance, there are many tablets or phones today that are highly creative but do little to tackle our most pressing societal needs. By contrast, the “Opon Imo” creatively packaged more than fifty textbooks for use by Senior Secondary School students in the whole of Osun state. In a similar vein, a telecom operator introduced innovation in Kenya, that allows money to be transferred by text, thereby empowered a nation in which 80% of the population has no bank account and where more money flows into the country through international remittances than foreign aid. Or think about Freeplay Energy that produces a variety of consumer devices including flashlights, lanterns, mobile phone chargers, and foot-powered generators. The company focuses on creating and developing self-sufficient energy products that give millions of people access to products and services in areas that are off the electricity grid. This is a project that reaches scale.  How can Nigerian businesses start thinking about cheap and sustainable ways of providing stable energy options to poor homes and small businesses in a country that desperately needs many options for power?

Another brilliant example of scalability is the Grameen Bank in Bangladesh. It makes small loans known as microcredit or “grameencredit” to the impoverished without requiring collateral. Its founder, Muhammad Yunus was inspired during the Bangladesh famine of 1974 to make a small loan of US$27 to a group of 42 families as start-up money so that they could make items for sale, without the burdens of high interest under predatory lending. Yunus believed that making such loans available to a larger population could stimulate businesses and reduce the widespread rural poverty in Bangladesh. Grameen Bank is owned by the borrowers of the bank, most of whom are poor women. Of the total equity of the bank, the borrowers own 94%. In 2011, the total borrowers of the bank numbered 8.4 million, and 97% of these were women. The bank has distributed USD 11.35 billion in loans, out of which USD 10.11 billion has been repaid. The bank claims a loan recovery rate of 96.67%. This is a lesson in strategic scalability.  My poser is where can the interest of businesses intersect with the opportunities for creativity and scale that are largely informal sector presents? How can Nigeria’s microcredit, retail, smallholder agriculture, etc, benefit from corporate innovation and organisation?

Accordingly, the true sense of sustainable value creation for any business must view financial profitability from the lenses of economic development.  So, while compliance with basic ethics and the code of corporate governance may yield benefits to shareholders and executives, enhancing the socioeconomic context in which a company operates is the only true way the company builds long-lasting value. Companies must think investment in infrastructure, job creation, skills development and so on. Better still for its corporate objectives to identify and promote inclusive business. Does wealth do more to empower employees, SMEs in the supply chain and poor communities?

In all, I believe we can collectively build a responsible ecosystem, where we do our bit as government and businesses pitch in.  The idea is to retain and demonstrate integrity to a common cause and enterprise.  A cause that ensures that in our quest for wealth creation, we jointly and systematically empower as many downtrodden Nigerian Sadhus as we can. An enterprise that is both forthright and relentless in the effort to build a new Nigeria, where leadership both in Statehouse and in the Boardroom, serves with the integrity of purpose.  How do we resolve the ethical dilemma of corruption and the violations of the rule of law? It is clear that tolerating a corrupt government because its members are our friends, or members of our ethnic or religious groups, means that we are complicit in the heartless destruction of lives and futures caused by corruption. The decision to confront corruption in a corrupted society is a tough one for most individuals, because it may mean losing position or other benefits. We all remember what happened to Sanusi Lamido  Sanusi. Most simply cannot take the risk to their comforts. This leads to my conclusion. Business Integrity or integrity generally, is impossible without some sacrifice. Sometimes just the sacrifice of delayed gratification, but many times in a corrupt society, it may involve even physical suffering.  The commitment of the Buhari government is to fight corruption and create an environment where ethical choices are easier to make, where we do not lose our jobs and our livelihoods or status merely because we told the truth.

Thank you.

 

 



Quote

"A man cannot lack personal integrity and at the same time have business integrity. Neither can he exhibit business integrity when other aspects of his life are corrupt. One of the qualities of integrity to stress is therefore its consistency. Integrity is integrity. It should not change with the role of the man or woman, whether as a parent, a teacher, a businessman, a policewoman or a politician."