Coming Clean

Some companies in Asia are taking the war against sleaze down into the ranks, aiming to bring integrity to corporate culture.

Few companies commanded greater trust or respect. In business for well over a century, and with a reputation built on a bedrock of Swiss impartiality, by the 1990s Société Général de Surveillance (SGS) had become easily the world’s largest cargo inspection company. Governments and companies the world over had come to rely on the honesty of SGS to verify the size and quality of shipments of cocoa beans, industrial machinery, electrical goods and the like.

Then came 1997, an annus horribilis for the venerable US$1.8 billion business. In Pakistan, allegations emerged that a third party SGS had used to help negotiate a government contract had paid a bribe five years earlier to the prime minister at the time, Benazir Bhutto, in order to secure the deal. While SGS denies any wrongdoing, the incident cost the company its contract and tarnished its impeccable reputation.

Elsewhere in Asia, other problems had emerged too. In particular, some of the company’s customs inspectors in China, whose job was to assess the value of export cargo, were found to be receiving bribes in return for undervaluing the goods and so reducing import tariffs in destination countries.

For respectable SGS, such discoveries were a harsh wake-up call. If it wanted to preserve its role as a trusted verifier then it would need to work harder on its ethical standards. As Francois Stettler, the firm’s chief compliance officer, notes: “For the sake of its reputation, the company had to act swiftly and decisively.”

And that’s exactly what it did, overhauling its code of conduct and putting every one of the company’s 32,000 staff on an ethics training course that continues to this day. SGS also installed an ethics telephone hotline so that workers could report questionable behavior — a system that Stettler says has highlighted several breaches of integrity.

What’s more, the company set up an ethics committee to oversee the implementation of the code of conduct, to keep a close eye on levels of integrity at the company and to handle cases of misconduct. The committee also vets and approves all intermediaries — such as those used to help negotiate with governments – before they are allowed to work on behalf of the corporation.

Culture Vultures

Given the current spate of corporate scandals sweeping the world, the experience of SGS is instructive. For, while one government after another has introduced new rules to promote corporate integrity, few observers believe that merely complying with the law is enough to stamp out fraud, theft and corruption.

“Rules are useful, they provide a framework, but they only go so far,” observes Jamie Allen, secretary general of the Asian Corporate Governance Association in Hong Kong. “What’s needed as well,” he adds, “is for managers to go beyond the rules and instill a sense of integrity into their firms.”

A growing number of corporate executives agree with him, and are taking bold steps to achieve that. It isn’t easy, however.

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