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Additional Info: Policy Statements Speeches Photos Speakers & Noted Participants Featured Biographies Registration Media Information Conference Statement Regional Vitality in the 21st Century April 6-10, 2001 — Tokyo, Japan Dr. Helmut Sohmen Chairman World-Wide Shipping Agency, Ltd. Excellencies, Ladies and Gentlemen, Distinguished Panelists, Good morning and welcome back, as they say after the break on television. Former Chairman of course should quietly fade away but I must say it's a great pleasure to be back at a PBEC IGM. We now have the second plenary to get on the way with the title "Meeting Today's Management Challenges: Transparency, Environmentalism and Corporate Responsibility. " This description covers a very broad subject and I think all we can probably try to do this morning is to feel around the fringes and perhaps sink a few probes. Now in keeping with the theme of this plenary, I should first of all declare an interest. I'm a non-executive Director of HSBC Holdings plc which is one of the major sponsors of this IGM. You have heard Sir John Bond, the Chairman of HSBC speak earlier today. He is too modest and I can probably say it more easily than he can but HSBC is probably one of the most profitable enterprises in the world. And if you want a model for an ethical corporation, it probably comes as close as any other. As a result, I'm very proud to be associated with it. Now a few comments by way of introduction. The first point I would like to make is that I always thought profitability was corporate management's greatest challenge especially so at the time of appreciably slowing economic growth in major economies and anxiety about the rather short-term pessimism in economic outlook. So I thought profitability was meant to be included in the definition of corporate responsibility but some how I think it isn't meant to be or profitability is not seen as much as a challenge for management today. Perhaps it is symptomatic that we put the other issues, the other topics ahead of what by rights should be a corporation's continuing most important goal. Environmentalism on the other hand sounds like a new religion, a new ideology. Indeed in some quarters, it has become almost an ideology leading to pitched battles between various protesters and the guardians of law and order. As with certain religious beliefs, logic disappears and emotions and irrationality take over and confrontations become the order of the day but without effectively producing solutions. And yet we have come a long way already from the times when environmental issues seem to domain of the radical fringe whose concerns seemed exaggerated and whose opposition to specific corporate or governmental actions appear to unnecessarily increase cost or create obstacles to the pursuit of corporate objectives that of profitability. But today the greens have become respectable members of various governments and most corporations have learnt that to be environmentally aware can in fact be profitable and good business. Indeed whole new industries have sprung up to help keep the environment clean or to eliminate the consequences of past sins. I think the real problem with environmental consciousness today is the fact that the standards are still shifting. Objective benchmarks are rare and are also very often the subject of sudden change at the whim of governments and of pressure groups. Particularly when conducting business across national boundaries as more and more of our PBEC members are doing, it is frequently difficult for companies to do all rules full justice all the time even with the best of intentions. We have also by and large stopped arguing about transparency and accepted it as something very necessary to establish and maintain confidence in markets generally and in individual players in these markets. Transparency must be good, it's like shining a light into a dark cellar, makes it easier to see and remove the dust and the cobwebs and perhaps even get rid of the rats, again have a better use of the premises. Transparency stands for a lot of different objectives and practices. They include good accounting or the harmonization of international accounting standards, effective internal controls, adequate communications and proper documentation for a good system of management reporting. But the term transparency is also used as a euphemism when the real subjects are corruption, money laundering or insider dealing or simply the intentional disregards of statutory regulations or guidelines of codes of good conduct. We have accepted in some places it is difficult to achieve full transparency because in some places the social norms of behavior and culture traditions stand in the way. However enterprises and whole economies which use that as an excuse to remain and retain their old systems and do nothing do so at their own peril, especially again in this globalizing world of ours where the benchmarks are constantly moving upwards. So while we may have to occasionally use a little patience, we must not give up pressing for continuous attempts at reform and change. Corporate responsibility has been turning into a real mine field. Questions arise, responsible to whom - shareholders, stakeholders, the public at large or the whole global community and responsibility for what - profits, job creation, specific utilitarian or charitable services or the general public welfare? Do private sector companies have to play the role of public utilities, as it's sometimes demanded especially in financial institutions. Who decides or defines the limits of any such obligations? Who accesses the performance of enterprises in this area, governments, NGOs, stakeholders or professional shareholder associations? What philanthropic gestures are adequate? In other words where does community building start and end? What happens when the attempt to conduct business ethically conflicts with statutory norms or with contractual obligations. Again as we go more and more global in our business dealings, conflicting interests among widely different audiences or customers may well put contradictory demands on enterprises and on their management. To find a way through this maze is the real challenge in my mind, not necessarily the specific methods adopted to improve the organizational standards of good corporate governance. It requires experienced and responsible people to manage this process but in our increasingly litigious environment and in the regulatory jungle we find ourselves, it is becoming more and more difficult to find these people - people who are willing and able to take responsibility. This is an ironic and also very dangerous result. Before I call on the speakers, let me emphasize and as many of you know, in recent years, PBEC has been in the forefront of calling for increased transparency, calling for better environmental consciousness and for better corporate governance. So we are spearheading the effort from the private sector. I've said enough and it's time to call on the members of our panel to hear their views and to listen to their recommendations and I would like to thank them already at this point for their willingness to come and join this panel and for preparing papers. So if I may call on the Ambassador as the first speaker and thank you up to now. Thank you. Thank you Ambassador Valdivieso. May I now call upon Tunku Abdul Aziz Ibrahim to make his remarks. Thank you very much Tunku for your rather strong words and good arguments. I'd like to call on Gary Benanav, Chairman of the PBEC US Committee to talk some more about corporate governance. Thank you Gary for some very valuable points you made. I think it will raise a number of questions. Could I now call on Mr. Kondo who is a senior Japanese diplomat and currently Deputy Director General of OECD in Paris, Mr. Kondo. Thank you Mr. Kondo and may I thank all the speakers for keeping to their allotted time frame which gives us a chance to invite some questions from the audience. I think we have run out of time. If I may just briefly summarize, there is a fairly high sense of agreement among the panelists on the evils of corruption, the evils of bad corporate governance. We touched on the environment but I think that topic was thrown into the theme and didn't quite fit so we didn't fully explore it. Yet there were useful statements made on the main subject which is corporate governance. Tunku said that corporate governance was not an end in itself, of course not, it helps generally to increase confidence and particularly also helps to ensure stability of markets a point that Gary forcefully made. Tunku also said that corruption does have victims and he is quite right at that and the victim is the community in which corruption is allowed to flourish. The victim, the community suffers because that community will lose competitiveness and in a world that increasing allows greater transparency because of the modern methods of communication and data transmission in a community that is seen falling below the standard world will see the result in economic terms. An issue or an aspect of the subject that we didn't perhaps explore sufficiently well is education. You cannot just rely on investigation and prosecution of corrupt practices and all that is meant by that term. You also need education to ensure that people understand that it is a bad thing. Even communities that have traditionally been practicing "guan xi" in its negative form, whether you call it corruption can be changed if enough effort is made to educate the community at large that it can be done better. Profits can in fact be increased sometimes by being more ethical than being more corrupt. It can be changed. Hong Kong where I come from is a good example. So let me than the panelists again for their valuable presentations and let me thank you all in the audience for your patience, for your interest and for your participation. We'll now go to lunch and I hope to see back in the afternoon in the break out sessions.