Stricter Ethical Standards Called Key to Global Recovery

As the global economy sours, multinational corporations should adopt stringent ethical standards of openness, disclosure and transparency that will restore trust in the business world and get things moving again, says the head of an influential international organization.
Business ethics should be at the center of any new road map for the global economy, said Angel Gurria, secretary-general of the Paris-based Organization for Economic Cooperation and Development (OECD), which has members from most of the world’s developed nations.
“The cost of bailout and fiscal packages is going to linger on for generations,” Gurria said in a recent address to the European Business Ethics Forum. “Our societies are now so disgusted with business practices that there is a growing call for stronger-than-ever regulation. And we run the risk of returning to selfish nationalism or cumbersome overregulation.”
OECD released global unemployment figures on Feb. 9, 2009, that underscored Gurria’s call for a new effort at global ethical cooperation.
In Europe, the unemployment rate was 8.0 percent in December 2008, 0.1 percentage point higher than the previous month and 0.8 percentage point higher than a year earlier, OECD said. For the United States, the unemployment rate for January 2009 was 7.6 percent, 0.4 percentage point higher than the previous month and 2.6 percentage points higher than a year earlier. For Japan, the rate was 4.5 percent in December 2008, 0.5 percentage point higher than the previous month and 0.7 percentage point higher than in December 2007, OECD said.
Any reconfiguration of the international business system must guarantee transparent managerial incentive schemes, Gurria said.
“One of the main lessons of this crisis is that companies and markets can’t rule themselves. Financial innovation sacrificed business ethics for the sake of extraordinary profit,” Gurria said. “Trust is the basic element for the well-functioning of markets and societies. And we have either lost it or at least misplaced it.”
Business ethics is driven by transparency, objectivity, reliability, honesty and prudence, Gurria said. Multinational corporations can adopt some effective self-regulatory practices that can enhance their credibility, he said.
For example, safeguards to protect legitimate whistle-blowing activities are recommended, including protection of employees who, in the absence of timely remedial action or in the face of reasonable risk, report illegal or wasteful practices. OECD encourages, where practical, compatible principles of corporate responsibility among business partners, which will allow corporations to generate the key asset to conduct business and discharge its fiduciary responsibility: trust.
In addition, OECD recommends that multinational corporations:
Ensure that timely, regular, reliable and relevant information is disclosed regarding their activities. This should include the financial and operating results of the company.
Apply high-quality standards for disclosure, accounting and audit.
Respect the right of their employees to be represented by trade unions and other bona fide representatives of employees and engage in constructive negotiations.
Contribute to the abolition of child labor.
Contribute to the elimination of all forms of forced or compulsory labor.
“We have said that we advocate improvements in regulation, supervision and corporate governance as part of the overall strategy for getting the world economy growing again,”