The new CEO imperative

Countries are not corrupt, nor are their governments or the businesses that reside there. Individuals are. The financiers who exploit illegal tax loopholes for their own benefit, the procurement director whose promise of a bribe will secure a contract that should have gone to a rival, the elected (or unelected) official abusing their power to line their own pockets.

It is an unfortunate consequence that such individual actions – and scores of others like them – can bring down governments, destroy businesses and ruin corporate reputations. The crime may be committed by one but the penalty is endured by all.

Allowing corruption to flourish in the hope of short-term gains, institutions – and especially the leaders of those institutions – put themselves at an enormous disadvantage. Often, catastrophically so. Conversely, it is the CEOs who commit themselves to ethical and transparent practices, who display steely determination in creating, abiding by and insisting upon moral, principled business codes that put themselves at a competitive advantage.

In this new era of data-fuelled transparency, when even the slightest error or misdeed can be magnified within seconds around the world, taking a stand against corruption has more urgency attached to it than ever. And showing leadership carries with it a reputational respect that money simply can’t buy.

Which is why a year ago the World Economic Forum’s Partnering Against Corruption Initiative (PACI) launched the PACI Vanguard, a group of CEOs from more than 100 leading companies committed to the highest standards of ethical conduct. For the past year, the Vanguard has been moving toward the implementation of a global anti-corruption agenda largely informed by the action plans developed by OECD and G20/B20 anti-corruption dialogues.

Specifically, the Vanguard has been collaborating with the OECD to bring a strong business voice to efforts to get governments to take more direct and deliberate steps to enforce the laws they put in place as a consequence of signing the OECD’s Convention on Combating Bribery. On the G20/B20 front, the Vanguard, together with the B20 Anti-Corruption Task Force, will this year launch a new global challenge initiative. The initiative will for the first time seek to align the global anti-corruption agenda, and as a result, shift the focus of B20 anti-corruption work from a “recommendation process” to one centred on implementation of the proposals developed during last year’s G20/B20 sessions conducted under the Australian presidency.

Many of those proposals built quite well on previous efforts orchestrated under the French, Mexican and Russian presidencies with a particular emphasis on infrastructure, trade, human capital and financing growth.

With that focus, the Vanguard is an example of how, by building on collaborations that reach to the very heart of a corporate structure, and by utilizing individual strengths and spheres of influence, CEOs and other decision-makers can affect the sorts of changes within business that will benefit generations to come.

Such a partnership between nations and globally recognized leaders will be a powerfully motivating force, creating systemic and integrated structures to combat wrongdoing, and halting the way business can sometimes operate to the detriment of everyone.

Corruption is a hugely corrosive force. It’s financially damaging – IMF research has shown that there is almost 5% less investment in corrupt countries than those that are corruption-free, and the World Bank estimates that it adds 10% to the cost of doing business globally. But it also leads to waste and inefficiency, provides an endemic barrier to economic development, imposes even harsher conditions on the least fortunate in society, penalizes business with an endless stream of bribes and payoffs, and leads to a collapse of public trust, an undermining of the rule of law and ultimately delegitimizes the state.

Viewed in this way, fighting corruption and leading by example is fuelled not only by a sense of morality but good business sense, too. Every CEO should consider such transparency as a means of providing their company with a competitive advantage, enhancing their reputation and ensuring growth within the market and nation in which they operate.

This is the new CEO imperative. To implement ideas and policies and take concerted action to beat corruption in both established and emerging markets. To insist upon transparency in the drawing up of contracts and the flow of money. To recognize that there can be no plausible deniability anymore, that it is the duty of every CEO to be aware of the corruptible maze of loopholes. To commit to working together in cleaning up the working environment.

Individually, our effectiveness in combating the people who tarnish the reputations of those they represent and work for is limited. Together, however – in this forum here at Davos, in which we seek to tackle the world’s most pressing problems and discuss with each other the best ways of transforming the global landscape – we can create an alignment, set the agenda and change the dynamics of the market.

Our credibility depends on it.

Author: David T. Seaton, Chairman and Chief Executive Officer, Fluor Corporation, USA

Image: A man casts a shadow as he walks through a ray of light in New York, March 20, 2012. REUTERS/Shannon Stapleton