Presented to: February 15, 2005
The World Bank
Core Course on
Governance and
Anticorruption
PRMPS, WBIGP & INT
Presented by:
Bob Barnes
Consultant, ECSPE

Why Does Good Governance,
Ethics and Integrity Matter?
 The high correlation between good governance and the effectiveness of developmental assistance
• The principle of conditionality
• The principle of selectivity
Governance &
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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
Governance &
Anticorruption
Core Course ‹#› The World Bank

Why Do Ethics and Integrity
Matter?
 Public confidence in government is key to a stable, functioning democracy
 Unethical behavior in the public sector seriously undermines public confidence
Governance &
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Core Course ‹#› The World Bank


Ethics and Values – What Are
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
Governance &
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Universal 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
Governance &
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Universal 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
Governance &
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Ethical 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
Governance &
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Ethical Dilemmas
 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
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Ethical Dilemmas
 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?)
Governance &
Anticorruption
Core Course ‹#› The World Bank

The 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 online
Governance &
Anticorruption
Core Course ‹#› The World Bank

The Goals of a System of Ethics
 Align descriptive values (the is) with aspirational values (the ought)
 Mechanisms
• Guidance/training
• Compliance enforcement
• Positive incentives
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Governance &
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The Goals of a System of Ethics
 Minimize ethical dilemmas
 Mechanisms
• Adjust criteria for success – remove pressure to be unethical
• Transparency of interests
• Internal mechanisms for advice
Governance &
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Core Course ‹#› The World Bank

The Goals of a System of Ethics
 Provide a framework for resolving ethical dilemmas that do occur
 Mechanisms
• Ombudsman
• Secure channels for reporting misconduct
• Effective “no retaliation” protection for whistleblowers
Governance &
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Two Approaches to Attain the
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
Governance &
Anticorruption
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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
The World Bank
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The Ultimate Compliance-Based
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
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
Governance &
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Ethics Management Systems
The answer: Both are required
The challenge: finding the right balance
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Elements of An Ethics
Infrastructure*
• Political commitment
• An effective legal framework
• Efficient accountability mechanisms
• Workable codes of conduct
The World Bank
*OECD, Public Management Occasional Paper No. 14
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Elements of an Ethics
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
The World Bank
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An Example of an Ethics Framework
22

Principles for Managing Ethics in 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
The World Bank
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Principles for Managing Ethics in 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
The World Bank
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
Principles for Managing Ethics in the Public Service*
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
Governance &
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Principles for Managing Ethics in the Public Service*
 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 Governance &
Anticorruption
Core Course ‹#› The World Bank

The Indispensable Element to an
Ethical Organization
27

“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 Governance &
Anticorruption
Core Course ‹#› The World Bank

Responsibilities 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
The World Bank
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Responsibilities 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
Governance &
Anticorruption
Core Course ‹#› The World Bank

Responsibilities of Leadership
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
Governance &
Anticorruption
Core Course ‹#› The World Bank

Responsibilities 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
Governance &
Anticorruption
Core Course ‹#› The World Bank

Responsibilities of Leadership
 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
Governance &
Anticorruption
Core Course ‹#› The World Bank

A Parable on Ethics
34

The Lessons of Enron
Thoughts on some of the causes of, and lessons from, the Enron meltdown
Governance &
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Tools, Resources, and Initiatives
A (Very) Partial List
36

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
Governance &
Anticorruption
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IMF Questionnaire on Fiscal
Transparency
 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
The World Bank
Governance &
Anticorruption
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Other 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
Governance &
Anticorruption
Core Course ‹#› The World Bank

Other Resources
 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
Governance &
Anticorruption
Core Course ‹#› The World Bank

Other Resources
 Transparency International Source Book
2000, Combating Corruption: The
Elements of a National Integrity System
• Available at www.transparency.org
• Contains detailed information on anticorruption initiatives world-wide
• Contains extremely useful “Best Practices”
Annex
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Other 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
Governance &
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Q&A
The World Bank
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