Ethics in Business – With whom does the heartbeat of a nation lie? – Part 1

As I write this column, Greece is going through yet another public sector strike. A reporter from an international media commented – why should we give them our money if they keep going on strike. Train stations closed, only emergency services available in hospitals, government agencies out of bounds. In short – one’s daily life can simply come to a halt when its public sector crashes. This would be an anathema to Gandhi’s saying, “President means Chief Servant”

In the face of such strikes that has taken place across Europe and in some countries in South America of late, public officials do come under some amount of flak for just being – yes – public officials!  There is no doubt there are perceptions and biases against them. Some may argue these are fair expectations for those whose pay cheques are from tax payers’ contributions.  Public sector is not a vocation for most. It is a calling for the passionate. It could also be the last and only option for those who may have exhausted other avenues of a career.

Think about this though for a second – the average adult heart beats 72 times a minute; 100,000 times a day; 3,600,000 times a year; and 2.5 billion times during a lifetime. It pumps over 2,000 gallons of blood through 60,000 miles of blood vessels each day which is twice the circumference of the globe. The heart creates enough energy to drive a truck 20 miles every day. During an average lifetime, the heart will pump nearly 1.5 million barrels of blood—enough to fill 200 train tank cars. It is said this is equivalent to driving to the moon and back. The heart can continue to beat even after separated from the body because it has its own electrical impulses. Even a foetus pumps about 60 pints of blood a day by the time it is 12 weeks old.  The heart begins beating at four weeks after conception and does not stop until death. The heart beats way before the brain is formed in a foetus. This lump of flesh inside of our body is more often than not neglected, underestimated and taken for granted. Just imagine for a split second –  it stops.

Arguably, the public sector is the heartbeat of a nation. When it stops – our hospitals stop,  police and armed forces stop, post office stops, social maintenance stops, the running of the country slides to a halt. When it is efficient and healthy, the country will reflect it externally. When it is productive, this is manifested in the competitiveness and sustainability of the country. Equally, when it falls short of its performance and expectations, that too reflects in how the country is perceived locally by its own people, and globally by its peers. This could not have been better said than by Abraham Lincoln, “”Our government rests in public opinion. Whoever can change public opinion, can change the government, practically just so much.”

This two part interview discusses the Malaysian Public Service with the Chief Secretary to the Government of Malaysia (Head of Public Sector and Cabinet Secretary), Excellency Tan Sri Dr. Ali Hamsa. It discusses the role of ethics in public sector locally, globally. Mostly it braces the topic of whose expectations are they here to serve and  where does ethics stack in these priorities.

There is an old Arab saying which in essence means, “Justice lies in the heart of the judge”. There can be laws and  there can be judges. Ultimate justice can only be served where there is sound ethics in the hearts of those serving the judgement. The public service presides over the providence of the people of a country. In the final analysis – how healthy that country is lies in the health of its heart beat. How healthy this heart is anchored on the virtues of the men and women who have chosen to serve the country as their calling and as their vocation. The challenge for anyone who have chosen this path of service is to serve as Thomas Jefferson said, “I never did, or countenanced, in public life, a single act inconsistent with the strictest good faith; having never believed there was one code of morality for a public, and another for a private man” or as The Caliph Umar Ibn Khattab (may God preserve him) said, “Trust is that there should be no difference between what you do and say and what you think.”

Chief Secretary to the Government of Malaysia 

We cannot stay in the same niche forever. We need to adopt transformative continuity. We need to continue progressing towards a better service and adapt to changes of time. Each public service I believe must have its own “moving forward”.

1.  Wealth distribution and ethics – there is heightened debates on global inequity and the culture where wealth either lies in the hands of select and small group, or that the principles of creation of wealth are inherently flawed. In your view, is there a correlation between global wealth inequity, wealth distribution and ethics in business?

There are correlations between global inequality, wealth distribution and business ethics.

In a global perspective, there are three possible ways to measure global wealth inequality:

1. inter-country inequality (in terms of per capita GDP).
2. international inequality.
3. inequality within the country.

Some schools of thought consider inequality necessary, as it promotes investment and growth of the economy, while others consider it from a human development perspective as a growing social problem. However, in my opinion, high inequality is destructive to the economy, society and development.

Global wealth inequality or economic inequality between countries will inhibit growth and development potential of the least developed countries. This in turn will limit the capability and opportunity of these countries to manage the internal inequality and wealth distribution issues.

Wealth distribution may also influence the level of inequality, but human capital or the individual’s ability becomes a prominent factor in wealth creation and wealth distribution. The economic structures and systems, as well as business culture, practices and ethics also contribute to the wealth creation.

Reconciliation of inequality should be centred on the development of capacity and capability, as well as supportive regulatory framework to guide proper business conducts, which is ethical and acceptable to the society. At the country or household level, measures focusing on mobilising human potential through developing and enhancing the capability of the less fortunate groups will then help to mitigate within country inequality and wealth distribution.

Corporate behaviour or business ethics also has a significant correlation to wealth distribution and inequality. In fact, corporate behaviour or business ethics can help reverse the inequality.

From a global perspective, trade regimes, policies or systems may affect inequality through growth and development potential. At the country level, regulation is needed to facilitate and induce interests of business, which are aligned to development and reducing inequality. It is also essential to induce good governance and ethical business practices that are acceptable to the society. Rules and procedures that are more transparent will remove unnecessary bottlenecks and improve governance. In this environment, entrepreneurs and businesses will operate efficiently and create a more balanced outcome of economic and social value. In the Malaysian context, the Government has set rules and regulations, and provided an environment conducive for businesses to thrive. However, businesses have a responsibility towards the society. This can be done through corporate social responsibility (CSR) programmes.

However, to place the responsibility entirely on corporations and the regulators will not be sufficient. Individuals or groups of individuals that form the society will also have to play their respective roles. To sum it up, it is the responsibility of all parties or stakeholders, the businesses, regulators and society, to work together to eliminate, or at least reduce, inequality.

2.  Corporate governance and morality  – What is your definition of ethics in business? How does it relate to human character and morals? How does one regulate character in businesses and markets? What is Malaysia doing in this regard , specifically in the public sector?

First, we have to be clear on what business ethics are. Business ethics is about doing the right thing for your business’ stakeholders. Economic and social goals do not have to be mutually exclusive if we consider the importance of striking a balance among different groups of stakeholders – the board and its shareholders, employees, customers, regulators and government, as well as the greater market and community at large.

While it may be increasingly complex to decide on the right balance, I believe the integrity of a company depends on the integrity of its top management and it is this integrity, which will achieve the right strategic balance between stakeholders. Failing this, companies should not underestimate the implications of a potential trust crisis, such as declining share prices and loss of investor confidence, as there have been many examples of companies paying the price for ethical failings in the public domain.

Character in business and markets definitely need to be regulated, and I believe this is possible through the enforcement of codes and regulations. The regulation of corporate governance in Malaysia is often limited to agencies involved directly in law enforcement such as the Ministry of Finance, Bursa Malaysia, Securities Commission (SC) and Companies Commission of Malaysia.

In the aftermath of the 1998 financial crisis, the Government decided to adopt corporate reforms such as the Malaysian Code of Corporate Governance (revised in 2007 and 2012) and Bursa Listing Requirements to enhance the quality of good corporate management practice. Companies have since become more transparent by making disclosures, as required by Listing Requirements, thus imposing more stringent monitoring by shareholders, while increasing the power of the Board of Directors in the firm’s decision making. Admittedly, the effectiveness of these measures is very much dependent on the integrity of financial reporting and quality of a company’s stewardship.

Within the public sector, MAMPU (Malaysian Administrative Modernisation And Management Planning)  has propagated the Public Service Ethos, encompassing eight core values (integrity, sense of urgency, citizen focus, collaboration, innovation and creativity, consultation and engagement, complaints as a gift, and knowledge and skills). To strengthen and reinforce positive values in the public sector, CTI-PCI (fast, accurate and (with) integrity – productivity, creativity and innovation) was introduced by the Honourable Prime Minister of Malaysia as guiding principles for civil servants. Integrity is held in the highest regard as the basis of ethical behaviour towards building an eminent public sector and managing the war of perception.

As Chairman of the Malaysian Institute of Integrity (IIM), I always stress on the importance of collective action and support in building a nation of integrity. The National Integrity Plan, launched in 2004, identifies five key objectives including reducing corruption and abuse of power and enhancing corporate governance to guide the conduct of both business and social development in Malaysia. The NKRA for Fighting Corruption under the Government Transformation Programme introduced the Corporate Integrity Pledge, a company’s assurance to uphold the Anti-Corruption Principles for Corporations in Malaysia, which is monitored by the Malaysian Anti-Corruption Commission (MACC). More recently, the IIM has published a guidebook in collaboration with the Chartered Institute of Management Accountants (CIMA) titled “Embedding Ethical Values into the Corporate Culture” as one of several initiatives to support the national agenda of fighting corruption under the Government Transformation Programme.

 3.  Ethics in the public sector –  What have institutions like INTAN and RSOG done in this subject? How can public sector address the growing concern of conscience and ethical crises facing the world of business, trade and commerce globally?

INTAN and other public service training institutions play an important role in promoting ethics as part of work culture in the public sector.

INTAN has been consistently educating civil servants on ethics and integrity through its collaboration with the Malaysian Institute of Integrity (IIM) throughout the year. Seminars and talks on integrity have also been held on an annual basis as a reminder to civil servants on the importance of integrity. INTAN is currently developing a course, encompassing the six principles of CTI-PCI for civil servants to adopt to help them move beyond a “business as usual” mindset in order for them to provide better service to the rakyat. In line with the transformation of INTAN, the Centre for Integrity and Professional Ethics has been established to foster a culture of innovation, ethos, integrity and values through quality learning.

RSOG has provided numerous workshops on integrity management as well as incorporating modules on fighting corruption, enhancing transparency and civil service impartiality in its leadership development programmes and leveraging upon case studies of where such systems have worked in other jurisdictions. Such training facilitates necessary judgement and skills enabling public servants to apply ethical principles in particular circumstances as they arise, and empower public servants to confront and resolve ethical problems. Thus, leaders are also able to demonstrate and promote ethical conduct across their agencies, which are intended to permeate the entire public service and eventually become the new culture.

Society worldwide is demanding that all parties act according to high ethical and moral standards. The 21^st century brings renewed concern about maintaining high standards of ethical behaviour in organisational transactions and in the workplace. For Malaysia, conscience and ethical issues are very important. It is enshrined as the fourth challenge of Vision 2020, namely, “to establish a fully moral and ethical society whose citizens are strong in religious and spiritual values and imbued with the highest ethical standards.” This is also in line with the spirit and principles of the Federal Constitution and also the philosophies and principles of the Rukun Negara.

In line with this, among the initiatives taken by the Government are the introduction of the Malaysian Business Code of Ethics, which is based on the teachings of religious, philosophy and tradition of the plural society in Malaysia. This initiative is under the purview of the Ministry of Domestic Trade and Consumer Affairs and the establishment of the Business Ethics Institute of Malaysia to promote ethics through education, inculcation, and nurturing of values such as honesty, fairness, integrity, and self-regulation among business.

For the business, trade and commerce community, they also have to adhere to high levels of ethical practices on their own accord, and are also responsible that their supply chain adheres to similar conduct. We encourage sustainable business practices that are ethical, so that they can grow big and strong and produce goods and services that become not just household brands in Malaysia but respectable international brands that are fully integrated into the global production network and more importantly the global value chain. Businesses should also insist that members in their supply chain adhere strictly to values in business ethics, environmental sustainability, labour and employment and fair-trade practices. It is imperative that we make the right call on these important and often difficult issues.

On the trade front, we also have laws such as the Industrial Coordination Act 1975, Countervailing and Anti-Dumping Duties Act 1993, Strategic Trade Act 2010. Malaysia is also party to several international organisations, agreements, conventions and treaties that govern business, trade and commerce, such as the World Trade Organization, Convention Establishing the World Intellectual Property Organization (WIPO) 1967, WTO The Trade Related Aspects of Intellectual Property Rights Agreement 1994 (TRIPS Agreement).

In taking the lead globally, Malaysia has in place a number of initiatives to inculcate, encourage and instil ethical behaviour across all levels of the nation. The Government has zero tolerance on breach of ethics. The Enforcement Agency Integrity Commission (EAIC) is one of Malaysia’s practices that can be emulated by others. In addition, we have in place punitive measures, which we hope will serve as a deterrent and in extreme cases, as severe punishment for breaches.

 4.  CSR, ethics and moral compass – Many confuse Corporate Social Responsibility with Ethics in Business. The two are mutually exclusively. One is activity based whilst the other in based on the human morals and that of the moral compass of an institution. In this age of much greed and quick need for returns, how would you set the moral compass of an organisation like a public sector?

As civil servants we have to hold on to the 5 principles embodied in the Rukun Negara, namely

• Believe in God
• Loyalty to King and country
• Supremacy of the constitution
• The rule of Law
• Good behaviour and morality

These should be our guiding principles as we go about our daily responsibilities, especially when serving the nation, which is our core calling as we work in the public service. Civil servants should understand that their involvement in the sector is not merely a job, but a calling and a vocation that they have chosen to give their utmost to.

At this juncture, it is worth sharing some of the new approaches that have been adopted to transform the public service. I introduced concept of “Merakyatkan Perkhidmatan Awam,” (Citizenising the Public Service) when I took on this office in June 2012. This concept is anchored by six pillars, which are:

• Openness (Keterbukaan)
• Going to the ground and reaching the people (Turun Padang)
• Engagement (Musyawarah)
• Humanity and Spirituality (Insaniah)
• Public, Private and NGO Partnership and
• Sense of Belonging/Camaraderie (Kekitaan)

The renewed public sector now goes the extra mile to extend its services to the public in what I refer to as the “Search and Assist” approach, whereby we take extraordinary efforts and deliver levels of service that exceed the norm. The focus is on quality service to the people instead of personal glory and monetary rewards. I am certain there is merit in these new approaches for the private sector to draw from, as we are all interconnected.

5.  Ethics versus innovation versus legislation – What are the boundaries of progress and ethics in your view? How far do we develop our countries before we worry about carbon emission?  How does one legislate funds and investment decisions where there is a question of ethics and morality at stake?

It is expected that there would be different boundaries of progress and ethics for different fields such as medicine, environment, ICT, trade and finance. Demarcation of the boundaries of progress and ethics in a particular field depends on various factors, including socio-political and economic, cultural, religious, ethical norms and national interest.

In medicine, many controversial areas of innovation have been proposed to cure diseases and to improve health.  These innovations may involve manipulation of DNA, procedures on unborn foetus, genetic engineering/modification and much more. When human diseases evolve, technology will try to keep up, not only to cure but to prevent such diseases, sometimes compromising ethics.

Malaysia is striving to be a developed country come 2020, and we are right on track. Hence, it is foreseeable that with rapid and increased industrialised activities, it may result in Malaysia also becoming a carbon-emissions contributor in the near future, similar to that of other advanced countries. In this regard, Malaysia is conscious of environmental concerns and is committed to sustainable development and measures to control carbon emissions are being implemented. Honourable Prime Minister in his speech at the United Nations Climate Change Conference 2009 at Copenhagen announced that Malaysia would commit to reduce its carbon dioxide emissions by up to 40% by 2020 compared with 2005 levels. This however is conditional upon receiving assistance from developed countries in the form of transfer of technology and adequate financing. In any case, the problem of carbon emission is not something that Malaysia can tackle alone and it would most definitely need cooperation from other countries in this region in order to resolve this issue effectively.

Likewise with boundaries of ethics and progress, there would be different remits of ethics and progress for different fields. Nevertheless, there would be a need to balance between ethics, progress and innovation, taking into account national interest priorities. However, as a general principle, the remits of ethics and progress in innovation should be guided by:

(a)    human dignity and human rights;

(b)    benefit and harm;

(c)     autonomy and individual responsibility;

(d)    consent; and

(e)    respect for human vulnerability and personal integrity.

The question of ethics and morality may arise in funding and investment decisions due to many factors, such as where the proposed project to be undertaken involves the use, application or development of new, untested or controversial technology or results of scientific research. It may also arise due to the cost (harm)-benefit effects of the proposed scheme or project on the people and environment involved, whether real or perceived. Hence, where it is required to legislate funds and investment decisions, i.e. where policy and strategy are to be effected through legislative instruments, the key would be finding an appropriate balance between the security, economic and social interests and priorities of the nation as against the impact of the legislation, including on prevailing ethical and moral standards.

For this purpose, ideally a thorough study should be undertaken and the widest consultations held with key stakeholders to determine and address areas of concern. One tool that could be used is the “(regulatory) impact assessment” before the drafting of any legislation is undertaken. Impact assessments generally require project coordinators to assess a project’s impact and to explore alternatives and possible mitigation measures.

6.  Tender processes –The Ministry of Finance tender processes, said to be online, has come under some scrutiny. How transparent are the tender processes in Malaysia? What is your understanding of ethics in the process of tender evaluation of government contracts?

Electronic procurement i.e. ePerolehan has been developed to enable procurement on-line for supplies and services procurement. This is an effort and commitment by the Government to enhance transparency in Government Procurement (GP). ePerolehan will enable better accessibility to suppliers and information regarding procurement can be published widely to all interested parties. Tender documents can also be obtained electronically. To ensure a higher level of transparency and accountability, reporting mechanisms are in place and this will facilitate better monitoring by agencies. Government agencies have been instructed to implement ePerolehan and ensure that at least 75% of annual procurement of supplies and services (not including consultancy services) are transacted through the ePerolehan system.

The government has initiated procedures and regulations to enhance transparency in GP. In carrying out GP, Agencies/Ministries should adhere to the general principles of GP, namely Public Accountability, Transparency, Value for Money, Open and Fair Competition, and Fair Dealing. Agencies/Ministries should ensure procurement reflects public accountability entrusted to the Government.

Government tenders are published widely and tender documents contain all necessary information required by suppliers to enable them to prepare responsive bids. Tender documents should include clear instruction to bidders such as tender forms, specifications, evaluation criteria and terms and conditions of the contract to provide prospective bidders the necessary information.

All bidders participating in a tender are given equal consideration and are evaluated based on established criteria. All requirements must be clearly stated in tender documents to provide ample opportunities for bidders to participate in the tender exercise. The Technical and Financial Evaluation Committees evaluates the bids and evaluation reports are prepared by the Committees. The Evaluation Committee members are guided by a code of ethics. All information regarding procurement is classified information and may not be divulged to any party not involved in the tender process. The bidders should also be informed of the code of conduct and warned that any breach would render their bid being rejected.

Procurement personnel should avoid being involved in any form of corruption and abuse of power. Procurement personnel should always be trustworthy, honest, fair, transparent and ensure internal controls and mechanisms are in place to check any weaknesses.  The Government has instructed all Government Agencies to execute integrity pacts in procurement based on the Guidelines on Implementation of Integrity Pact in Government Procurement through Treasury Circular Letter No. 10 Year 2010.

Malaysia has also participated at the international level in combating corruption pertaining to GP. Among the initiatives are:

i)    United Nations Convention Against Corruption (UNCAC)

Malaysia is one of the signatories to UNCAC.  The UNCAC is the first legally binding international anti-corruption instrument.  The UNCAC obliges its States Parties to implement a wide range of anti-corruption measures affecting their laws, institutions and practices.  Chapter II, Article 9 of UNCAC provides specific clause on public procurement and management of public finances.

ii)  Anti-Corruption Action Plan (ACAP) for Asia and the Pacific

Malaysia is among the 28 Asia Pacific countries that are committed to prevent and combat corruption and has cooperated in formulating ACAP which also incorporates Government procurement.

 7.  Lobbying culture? – The private sector, especially global multinationals and Sovereign Wealth Funds (GLCs), are said to have more power than national leaders. Markets and even some economies are  controlled by large lobbyist. In your view, are governments succumbing to these large multinationals?

The assumption and assertion that the GLCs are wielding such power over the private sector in this country is certainly misleading, to say the least.

These companies may have grown and evolved significantly to form an integral part of the Malaysian economy by providing mission-critical services and catalysing developments in strategic sectors, but they operate their businesses firmly based on the concept of nation-building and good corporate governance.

Realising that GLCs play a critical towards the nation’s aspiration to become a high income nation by 2020, these companies have been on the road of transformation into high performing entities since 2004 and have helped accelerate the country’s social and economic development.

Under the ambit of the Putrajaya Committee of GLC High Performance (PCG), the transformation plan called the GLC Transformation Programme (GLCT), encourages the GLCs to observe three underlying principles – Performance Focus; National Development Foundation; and Governance, Shareholder Value and Stakeholder Management – and are guided by five policy thrusts, one of it being adopting best practices, which demands that GLCs operate based on merit, compete on a level playing ground, and be transparent in their dealings.

In Part 2, following on July 25,  Tan Sri Dr. Ali Hamsa discusses the media and its role in highlighting ethics, corruption, the public sector’s leadership and the future of Malaysia.

TAN SRI DR. ALI BIN HAMSA

Tan Sri Dr. Ali bin Hamsa was appointed as the 13th Chief Secretary to the Government of Malaysia by the Yang DiPertuan Agong, effective 24 June 2012. Born in Kluang, Johor on 29 August 1955, he obtained a Bachelor of Arts (Honours) degree from University of Malaya before furthering his studies to Oklahoma State University, United States where he obtained a Masters in Economics in 1986, followed by a Ph.D. in Environmental Sciences and Economics in 1997. On 22 April 2009, Tan Sri Dr. Ali was appointed as the Director-General of the Public Private Partnership Unit (UKAS), Prime Minister’s Department, a central agency created to spearhead Public Private Partnership (PPP)  initiatives, namely privatisation projects, Private Finance Initiatives (PFI), corridor development and facilitation funds. As the Chief Secretary to the Government, he is Chair of the Malaysian Integrity Institute (IIM), the co-Chair of the Special Taskforce to Facilitate Business (PEMUDAH) and Deputy Chairman of Johor Corporation (JCorp). Tan Sri Dr. Ali is also Member to the Board of Advisors of 1Malaysia Development Berhad (1MDB), Board Member of Bintulu Port Holding (BPHB), Penang Port Commission (PPC) and Bumiputera Agenda Coordinating Unit (TERAJU).

See other posts from on Ethics in Business:

Ethics in Business: Perception of sleepwalking

Ethics in Business: Facing medical ethics head on in Malaysia

Ethics in Business: A take on business ethics in the US

Ethics in Business: Moving Islamic finance from conference rooms to humanity

Ethics in Business: Walking the ethical track in Malaysia a perspective

Ethics in Business: Soul of ethics in the new Dubai

Ethics in Business: A conversation with Professor Tariq Ramadan

Ethics in Business: Where is the education for narcissistic leaders

Ethics in Business: With whom does the heartbeat of a nation lie, Part 2

Ethics in Business: Are we aware of the Iagos in our midst?

Ethics in Business: Fair trade or fair game, who benefits really

Ethics in business: What moves the conscience when mortality is at stake

Please: CSR is not Ethics in Business

Panel discussion: Medical ethics (plus video)

(Firoz Abdul Hamid is an Inside Investor contributor. The opinions expressed are her own.)