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The World Bank. Governance & Integrity Systems. Core Course on Governance and Anticorruption PRMPS, WBIGP & INT. Presented by: Bob Barnes Consultant, ECSPE. Presented to:. February 15, 2005. The high correlation between good governance and the effectiveness of developmental assistance

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The World Bank

Governance & Integrity Systems

Core Course on Governance and Anticorruption

PRMPS, WBIGP & INT

Presented by:

Bob Barnes

Consultant, ECSPE

Presented to:

February 15, 2005


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The high correlation between good governance and the effectiveness of developmental assistance

The principle of conditionality

The principle of selectivity

Why Does Good Governance, Ethics and Integrity Matter?


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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

Why Does Integrity Matter?


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Public confidence in government is key to a stable, functioning democracy

Unethical behavior in the public sector seriously undermines public confidence

Why Do Ethics and Integrity Matter?


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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

Ethics and Values – What Are They?


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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

Universal Values


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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

Universal Values and Ethics


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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

Ethical Dilemmas


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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?

Ethical Dilemmas


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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?)

Ethical Dilemmas


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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 on-line

The Goals of a System of Ethics


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Align descriptive values (the is) with aspirational values (the ought)

Mechanisms

Guidance/training

Compliance enforcement

Positive incentives

The Goals of a System of Ethics


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Minimize ethical dilemmas

Mechanisms

Adjust criteria for success – remove pressure to be unethical

Transparency of interests

Internal mechanisms for advice

The Goals of a System of Ethics


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Provide a framework for resolving ethical dilemmas that do occur

Mechanisms

Ombudsman

Secure channels for reporting misconduct

Effective “no retaliation” protection for whistleblowers

The Goals of a System of Ethics


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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

Two Approaches to Attain the Goal*


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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

Two Approaches to Attain the Goal*


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“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?

The Ultimate Compliance-Based System?


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“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

Is Integrity-Based Ethics Management Sufficient?


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The answer: Both are required

The challenge: finding the right balance

Ethics Management Systems


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Political commitment

An effective legal framework

Efficient accountability mechanisms

Workable codes of conduct

*OECD, Public Management Occasional Paper No. 14

Elements of An Ethics Infrastructure*


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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

Elements of an Ethics Infrastructure*


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OECD Principles for Managing Ethics in the Public Sector

An Example of an Ethics Framework


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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

Principles for Managing Ethics in the Public Sector*


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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

Principles for Managing Ethics in the Public Service*


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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

Principles for Managing Ethics in the Public Service*


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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

Principles for Managing Ethics in the Public Service*


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Ethics and Leadership

The Indispensable Element to an Ethical Organization


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“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


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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

Responsibilities of Leadership


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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

Responsibilities of Leadership


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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

Responsibilities of Leadership


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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

Responsibilities of Leadership


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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

Responsibilities of Leadership


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The Lessons of Enron

A Parable on Ethics


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Thoughts on some of the causes of, and lessons from, the Enron meltdown

The Lessons of Enron


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Tools, Resources, and Initiatives

A (Very) Partial List


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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

IMF Code of Good Practices on Fiscal Transparency


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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

IMF Questionnaire on Fiscal Transparency


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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

Other Resources


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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

Other Resources


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Transparency International Source Book 2000, Combating Corruption: The Elements of a National Integrity System

Available at www.transparency.org

Contains detailed information on anti-corruption initiatives world-wide

Contains extremely useful “Best Practices” Annex

Other Resources


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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

Other Resources - Training


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Q&A


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