What companies should know about bribes

Have you received letters from government officials requesting recommended amounts as your company’s contribution to the reconstruction of a monastery, museum, park or road? Do you remember the latest governmental letter ‘encouraging’ your company to help the victims of the flooding by contributing to the governmental disaster relief fund? What about frequent payments your company regularly makes to various officials in order to expedite a customs clearance, receive a stamp & signature or gain access to must-be-publicly-available information?

All of the above and many others are aspects of corruption which is widespread in Moldova. So widespread that we’ve adopted a fatalistic attitude by thinking there is no way around it and the best we can do is join in the ‘game.’ However, it turns out it’s not the best choice after all and there is a great deal a firm can do fight graft. The special Anti-Corruption Report published by The Ethical Corporation Institute provides a whole series of arguments why a company – particularly a multinational based in a developed country – should have an effective compliance policy in place in order to minimize corruption risks. One of the strongest reason for your company to ‘get its act together” in this area is that the enforcement of the US Foreign Corrupt Practices Act (FCPA) has significantly escalated in recent years. UK’s Serious Fraud Office (SFO) is also keener on investigating and prosecuting its companies for overseas corruption. Another reason to become less tolerant toward corruption is that, perhaps, leading companies in your sector are already working on drafting and signing voluntary compliance agreements.

Last but not least, another reason – an ethical one – to stay clear of graft, particularly in a poor country like Moldova, is that, by resisting corruption at the company level, you are giving a chance to the host country's overall institutional framework to eventually improve as well.

If companies declare the constant demands of grasping officials an intolerable abuse of official power, it will be more difficult for a broader culture of corruption to flourish,

writes Alexandra Wrage in “Bribes in disguise” in the same report.

Good governance: how much can companies do?

As I was browsing through the bounty of free articles and reports generously provided by The Ethical Corporation, I ran into a report entitled “Corporations, institutions and better governance” by Toby Webb and Meg Carstens, which particularly ignited my interest. This report describes a series of case studies of Western companies’ work aimed to improve the institutions and, ultimately, governance in developing countries. With the help of these case studies, the report concludes that companies have proven potential to contribute to governance capacity building in their host countries.

Learning about how BP took the lead in ensuring that the world’s fastest growing economy – Azerbaijan – avoid the pains of the “oil-curse” by pressuring the government to establish sound economic policies and improve financial management capacities; how UK’s Premier Oil gained Myanmar’ government’s trust and initiated human rights training for its military; and the Norwegian Statoil’s rationale to engage in human rights training of judges in Venezuela and Nigeria – all these facts are enlightening in view of a company’s motivation to embark on a risky yet impact-laden endeavor of influencing a country’s institutions and governance practices. In Premier Oil’s case the action was a response to its home civil society’s call to pull out of Myanmar which failed to address serious human rights issues. In BP’s case, the investor was interested in ensuring sustainable returns from the 40 year life of its project and support to improving government’s fiscal transparency seemed an adequate response. Statoil followed through its commitment to promote respect for human rights throughout the world, and both Venezuela and Nigeria were in need for assistance.

Learning about these efforts throughout the world makes me wonder what it would take for a similar project to unfold in Moldova. The need is here, and in many areas, including wide-spread corruption, specific human rights issues, political and financial barriers to development of independent media and pluralism, environmental challenges and plenty of social problems. Governance capacity in Moldova is far from perfect and would greatly benefit from strong initiatives initiated by private companies. Instead, what I see private companies display in Moldova is more of a subdued attitude bordering indifference or, worse, tolerance towards poor governance. Although attempts to gain government’s trust on behalf of companies are frequent, it remains unclear whether they aim to improve public institutions or further undermine them by finding new loopholes in the weak law enforcement systems.

A project well-done

AmCham Moldova has successfully completed a disaster-relief project. With funds collected from 8 companies, a family who lost their house during this summer flooding can now move into their new house in their native village, Purcari.

I like this particular project both for its affiliation to the CSR Committee – the first committee within AmCham Moldova and the only so far – and for it smooth and effective implementation. Although the funding collected was rather modest – around $ 18,000 – and was only enough for one family house, this project is evidence to good management of a joint CSR project. The idea was generated and subsequently supported by several AmCham members and then effectively and timely implemented by the organization’s staff. The communication part is there as well. Along with posting detailed information on the website, all members received an extensive account on the progress of the project, including optimistic pictures like this one.



But this was a disaster-relief project. While it is good to know that there might be significant potential in the Moldovan business community in case of natural disasters, I still wish for more mainstream CSR projects in such areas as reporting, environment protection, anti-corruption and human resources.

Energy companies and how we feel about them

In Mallen Baker's recent blog post about energy companies, he discusses the public perception of the ever-increasing profits in today's energy marketplace. Are energy industry profits legitimately 'excessive' or is it mere populism? His conclusion is that energy companies "have made excessive profits when society decides they have made excessive profits." The main reason is lack of competitiveness in the energy marketplace which looks like this: "switching providers is a pain, and very few people do it. The tariffs are confusing, and people don't understand the price signals."

This brings to mind my father's take on two energy companies - the private electricity provider, Union Fenosa Moldova, and the municipal heating provider - Termocom. He believes that each of these have one major goal only - to rip him - and other simple citizens - off and use the money to build fancy office buildings and drive expensive cars. This attitude is rather widespread among Chisinau residents. Needless to say, despite my dad's dislike for his electricity and heating provider, there are no real alternatives.

Personally, I'm pleased with the UF service because I find it much better than what other two (state) electricity enterprises have to offer. Termocom's problem, however, is different: since it's still publicly owned, it is extremely poorly managed which causes its all other problems. I would mention another important player in the Moldovan energy marketplace: the almost all-Russian MoldovaGaz. The tarifs for its services have been steadily going up but, interestingly, it still manages to operate under the radar of public contempt.

Communicating CSR: top 4 companies

To continue my previous train of thought - that businesses should communicate their CSR projects to maximize their impact - I was researching companies that present their CSR approaches in persuasive and compelling ways. Many companies do a really nice job so I compiled a quick 'top 4'.

1. Addleshaw Goddard, a London-based law firm and an active CSR promoter, sees four main areas which can make a business more sustainable and responsible: people, marketplace, community and environment. To make it more persuasive, they offer an interactive tool to determine one's CSR focuson its site.

2. Google supports diversity & inclusion in many ways as well as invests heavily in green & cheap energy research for which it got recognized in the famous Plenty 20 top.

3. Adidas Group, an international sports equipment manufacturer, allowed space on its site for sustainability-related information and encourages grant applications.

4. Ernst and Young, an international accounting firm, says it supports people, communities and enterpreneurs. This company is ranked 57 among the Fortune 100 Best Companies to Work For. I was positively suprised because the last time I heard about it, its office in Romania had a reputation of overworking its employees to death.

How businesses responded to flooding disaster in Moldova

First, I'd like to thank Lenka Surotchak, director of Pontis Foundation and a recognized expert in CSR, for her useful suggestions regarding this blog. One of her hint was to write about concrete CSR stories.

First thing that comes to mind is this summer's disaster brought about by the flooding of two major rivers, Prut and Nistru. The government's role was mostly visible - although tempted, I'm not going to evaluate its quality - in the immediate response phase, which is supposed to be the third phase in any sound emergency management system. Needless to say that the damage brought about by the flooding could have been smaller if the Moldovan government had done a better job in the first two phases: mitigation and preparedness.

The forth phase - recovery - is when companies were invited to assist. As previously said, the government created a disaster relief fund and encouraged everyone, especially companies, to contribute. Because most government funds have a reputation of being managed in nontransparent way, some companies initiated their own disaster relief programs (such as Orange, Moldcell, Philip Morris International, etc.) and/or contributed to alternative funds, such as the Amcham Moldova Disaster Relief Fund. While I can't find comprehensive information on the recovery efforts and results carried out by the government, I know that one family in Purcari village, Stefan Voda rayon, will soon move to their new house purchased from the the Amcham-managed fund.

Moldcell's project is particularly interesting and they are doing a great job at communicating their results and assessing their impact. The company offered the people who suffered from flooding free in-network mobile communication for two weeks. Driven by its core corporate belief that "communication becomes vital in exceptional situations", Moldcell designed and implemented an unique project in Moldova. Moreover, Moldcell mobilized its staff to donate various goods and distributed the donations to around 100 families.

Multinationals: defeated in Moldova?

In my previous post, I said that CSR is not a very widespread concept in Moldova. It does not mean that companies do not do charitable actions or engage in sponsorship. They do but few people know about such actions. Even fewer understand that such actions are part of a increasing global trend towards more sustainable business.

I've been telling companies that to increase the impact (both on their profits and community) of their various CSR programs they must make them public, talk and write about them in the most convincing way. This is where the role of companies' communication departments is most important. This sounds so cliche yet few companies in Moldova seem to do well in this area. For instance, although very explicit in their CSR practices worldwide, the Moldovan branch of the international electricity provider, Union Fenosa, hasn't even finished building their site yet, although they are known as a quite socially active company in this country. Union Fenosa Moldova has repeatedly reported significant customer-related issues and it seems obvious that small but smart investment in presenting the more humane side of its work has a potential to solve some of those issues. I wish I could list here some of the projects they've funded since they first came to Moldova in 2001 and even give links to these projects but, unfortunately, I can't do that and that looks to me as lost opportunity or, worse, a bad-managed investment.

So my point is: companies working in Moldova - particularly the multinationals with their experience and budgets - need to promote their CSR programs here as actively as they do it in other countries. Some will say they won't do this because the government does not encourage it. I'll respond with a saying: where there is a will, there is a way. Once the decision to invest in Moldova has been made, why let a self-centered and incompetent government discourage the internationally-renowned excellency and performance? It sounds like an easy defeat. And in such a small market?!

What is so interesting about CSR?

My background is in the government and non profit sectors. I've never actually worked for a for-profit company because I found the profit-making goals too materialistic for my rather idealistic worldview. The more humane aspects of companies - particularly those exposed through various ethical initiatives and social/environmental projects carried out by businesses throughout the world - first captured my attention and, very quickly afterwards, even my admiration.

I hear there is a debate around CSR. Whether it is worth the time and resources. Mallen Baker lists the major arguments against CSR and his responses. Needless to say and true to my background, I'm naturally against the arguments against CSR and I find Mallen Baker's responses quite reasonable. I subscribe under this:

Well managed CSR supports the business objectives of the company, builds relationships with key stakeholders whose opinion will be most valuable when times are hard, and should reduce business costs and maximise its effectiveness.

Companies have power. Large companies have a lot of power. Therefore, it is only logical (for me at least) to want to see this power used in the right way. After all, we (the democracies of the world) have come a long way since the dark ages of capitalism and claim to have achieved the most significant progress in the history of mankind. I see the potential companies together with their shareholders have in creating a world that is more economically and environmentally secure. Hopefully, one day responsible business-doing will become so ingrained in everyone's brains and actions that the debate itself will discontinue.

Back to blogging: this time about CSR

After a prolonged pause I took as Lucia Candu, the blogger, I’m happy to be back to the blogosphere with a new passion for an interesting domain – corporate social responsibility, ethical business, corporate citizenship, business sustainability – a domain that has multiple names, all nicely compiled in this Wikipedia entry.

I'll be using the acronym CSR, as this is the term mostly used in this part of the world, that is Eastern Europe. As Chair of Amcham Moldova CSR Committee and Program Officer at Eurasia Foundation Moldova Representative Office, I’ve been closely observing the way companies in Moldova are contributing to improving the local society and communities over the past couple of years. Therefore, this enables me to make a briefly assessment of the current situation.

In Moldova, the leaders in CSR are always-competing international mobile operators Orange and Moldcell. Moldcell even has a section on its site dedicated to CSR. They do great things such as sponsoring cultural events, supporting education programs, improving the local workforce and promoting CSR per se in a country where this concept is known by a limited few.

However, a lot more could be done both by government and companies to promote corporate responsible initiatives in Moldova. Personally, I've never heard a government official use this term, exept at the 2007 CSR for Moldova International Conference. The government prefers the term 'companies' (forced) contribution' to various challenges & crises. For instance, the immediate solution to the damage caused by this summer' flooding was reliance on companies' financial and in-kind contribution for the governmentally-managed disaster relief fund. There is very little information on the the fundraising process but many companies are not thrilled about this approach and would welcome an alternative. This was provided by Amcham Moldova and, as a result, one family is in the process of receiving a new house.