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Going Blue

Being a member of The Blue Company’s Ethics Committee that assesses potential new members and also their qualification for membership renewal, I was delighted to be part of last Friday’s “Going Blue” event at the Serena Hotel. It was a gathering of members, potential members and others interested in the anti-corruption theme of the Blue Company.

The programme was launched by Ken Oyolla, the Nation Media Group’s Chief Commercial Officer, and next was keynote speaker Dr Julius Kipng’etich, a Blue Company Advisory Board Member and Group CEO of Jubilee Holdings, who described corruption as the big reason why Kenya is stuck with its low per capita GDP. This corruption de-energises society, and unless the tone at the top is right, rewarding good people and punishing bad ones, we will continue where we are.

He was followed by Davis & Shirtliff Group CEO George Mbugua, who talked about how they live the integrity ideals of the Blue Company. He confirmed that “Going Blue” is a good idea, ie that integrity is. He emphasised the importance to Davis & Shirtliff of its values, about which they talk all the time… and which they live.

Next we heard from a panel, with Benard Kiragu, the Managing Partner of Scribe Services, Dr Joyce Omina, the CEO of the Institute of Internal Auditors, and Dr Aysha Edwards, the CEO of AAR Hospital, who talked about the emergence of policies, regulations and codes of conduct which bulletproof organisations against corruption. It’s important to get active participation in all this, we heard, so as to obtain buy-in; and also that auditors should be partners and consultants, and hence preventers, rather than characters who just inspire fear.

They were followed by Alexandre Baron, the EU Head of Section for Governance and Macro-economics. He explained how the EU is promoting international standards for integrity and compliance, rightly describing it as a global challenge.

Catherine Musakali, the Managing Partner of Dorion Associates and Founder Chairperson of Women on Boards Network, then explained why there’s an urgent need for the private sector to “Go Blue”, and she started by telling us a story of how she was once on her daily walk when she saw a police officer seeking bribes from matatus. She approached her, looked her in the eye and instructed her to “leave”, which she did – showing one doesn’t need to be just an impotent observer.

Corruption increases costs and undermines competition, she confirmed. Dealing with it is no longer optional, as today’s regulations demand it. It’s not just for Blue Chip companies now, as the modern consumer expects all those from whom they buy to be ethical. Customers are willing to pay a premium for products from suppliers whose values align with theirs, and they become loyal.

Increasingly, if one is unethical one risks fines, reputational damage and having a monitor imposed. There is a cost to such compliance, but it pays off in the long run. Investors too are prioritising these issues, as it enhances resilience and sustainability. The biggest obstacle to progress is mindsets, for they determine a company’s culture. But it is this that delivers the long-term benefits.

Now Blue Company founder and advisory board member Nizar Juma spoke, and he told us Jubilee has done very well despite being ethical. It’s difficult to prove corruption, he admitted, but everyone knows who is corrupt and who isn’t.

“So many of our children see their parents behaving corruptly, as a result of which they enjoy a new Mercedes, a new big home,” he said, “but we want our children to grow up saying their parents were corruption-free.” He concluded by suggesting that there is light at the end of the tunnel, however dim, and we must be brave in working on brightening that light.

Chief Guest Dr Habil Olaka, Chairman of the Centre for Corporate Governance, quoted Uhuru’s estimate that we lose Shs2b a day to corruption, suggesting that the private sector has a very important role to play here, as it is the supplier. Over the last few years the Assets Recovery Agency and the Financial Reporting Centre, have been established to combat this corruption.

We need well-structured decision-making, said Dr Olaka, which is only possible where there is good governance. He made the point that beyond focusing on long-term profits there must also be short time profitability to fund immediate sustainability, with a balance between the two.

Finally, before Nation Media Group’s James Sogoti, their General Manager Commercial, gave the vote of thanks, it was my turn – for ‘Closing remarks and next steps’, as the programme described it. It’s what I will write about in my next column. This one was about the “what”. Next will come the “so what”.

Corruption rife in the West too

I was in London for a few days in December, and there I came across an article on corruption in the Sunday Times by Matthew Syed—a management consultant like me—about how it works in western liberal democracies. He reckons the cancer of corruption has been growing there for decades, resulting in such consequences as the stagnation in their economies, the rise in inequality, and the collapse of trust in government.

He accepts that some may challenge his diagnosis of the underlying disease, pointing to Transparency International’s Corruption Perception Index (CPI) where Western nations continue to score favourably. But while the US, the UK and the EU countries tend not to engage in the kind of “transactional” corruption measured by the TI survey, what is seen in the West is a different kind of decay, subtler and more insidious.

He mentions the significant number of politicians who pass through the revolving door and earn huge sums of money from companies over which they once had oversight; notes how political parties are funded by an even smaller number of mega-donors; and observes that those who chair public committees and tribunals know that their elevation to the peerage is in the gift of those over whom they sit in judgement.

So it’s not about straightforward bribes. Rather “it is a covert edifice of nods, winks and reciprocal obligations that has created a parallel system of political power”. Thinkers over the ages like Milton Friedman and Friedrich Hayek have noted that corporations are not seeking to act in the public interest but “to protect themselves from the cleansing power of open competition by advocating sweetheart regulations, covert subsidies and other barriers to entry from insurgent rivals”.

Syed also quotes Luigi Zingales, who noted that “the best way to make lots of money is not to come up with brilliant ideas but to cultivate a government ally”. The consequence of such activity today is that dominant companies are staying ever longer in the main indices, and start-up rates are dwindling on both sides of the Atlantic.

Syed then quotes Matt Ridley, who saw that of Europe’s 100 most valuable companies, none was formed in the past 40 years. “Free markets have been replaced with rigged markets,” concludes Syed, “capitalism with a cronyish impostor.”

How extraordinary. In among all one reads about the contemporary trend of corporate social responsibility and about how we are becoming much more sensitive to the environment, to social issues and to good governance, here’s a contrary view, a really gloomy one.

As interesting as Syed’s observation of “corruption’s revolving door” are his proposals for how to seal that door before it is too late. His first one is to impose a ban of at least five years on ministers and regulators working for companies over which they had had oversight.

Meanwhile, he would significantly increase the salaries of ministers, which he accepts would be an extremely unpopular move. His logic is that higher-quality candidates would be attracted to such positions, and that they would be happy just serving the public interest rather than using their jobs in the subsequent service of corporate clients from whom the real money would be earned after leaving office.

One more suggestion, hard to imagine how it could work even in the environment Syed was writing about: a voucher system for funding political parties, where each person would have, say, £50 to contribute to the party or the candidate of their choice, encouraging parties to engage much more widely with voters. Alongside this, a cap on private donations. Without such remedies, Syed is convinced, the body politic risks being fatally harmed by the corruption cancer within.

As I read the article, I first wondered how mainstream Syed’s views are, and to what extent his suggested remedies are being considered. But mainly I thought about how what he spelt out relates to what happens here. Our position on Transparency International’s CPI is low, as we are expert at indulging in what Syed describes as “officials asking for bungs; ministers giving jobs to nieces and nephews; politicians siphoning off funds from state coffers to Swiss bank accounts”, the kind of corruption that has eased off in the West.

For sure here, “knowing people” so as to have allies in government is as important as anywhere; and offering soft-landing jobs to former politicians and senior government officials is commonplace.

It’s all relative, isn’t it though? While we are worse off than many, we are still not as bad as plenty of others. The struggle continues, here and elsewhere.