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CSRlive Commentary

01.25.2011 - 12:22PM

Category: Business Ethics

Do Business and Ethics Mix? Handling Ethical Dilemmas Abroad

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By Jim McArdle, Senior Vice-President, Legal Services and Secretary, EDC

Many companies today recognize they can sustain their success by doing business ethically and responsibly. We also all have seen breakdowns in ethics which have had serious consequences--think Enron, WorldCom and Siemens.

Ethics is a moving target - not only because of changing boundaries and higher public expectations at home, but also different cultural issues and perceptions when doing business abroad. This has created ethical dilemmas for all businesses--accented even more in the international arena. Financial institutions, including Export Development Canada (EDC), are no exception to this. The way we tackle these dilemmas has been informed and influenced by the evolution of corporate social responsibility (CSR) practices, in the financial sector and at EDC.

EDC is Canada's export credit agency (ECA) providing financing and credit insurance products and services to help Canadian companies do business around the globe. Many other countries have an ECA to promote their country's exports. Agreements through the Organization for Economic Cooperation and Development (OECD) help ensure a level playing field among ECAs.

In the late 1990s, these OECD agreements expanded to include the environment and anti-corruption. Following this lead, Canada made it a criminal offence to bribe foreign public officials. Since then, ECAs and other financial institutions have developed strong CSR policies and practices to manage risk and comply with evolving domestic and international laws and standards.

For example, in addition to its Code of Business Ethics and Code of Conduct, EDC requires its customers sign a declaration that they are not and will not be involved in bribery and corruption. Through this documentation, EDC reserves the right to terminate business and refuse insurance claims if a customer is found to have engaged in such practices.

EDC has also implemented processes to ensure we do not knowingly support a transaction involving bribery or other corrupt practices. In one case, a Canadian exporter had an opportunity to sell equipment to a private foreign airline and was seeking buyer financing through EDC. The airline owner was a prominent businessman under investigation in his country for making inappropriate contributions to political campaigns. The country also ranked in the bottom quartile of Transparency International's Corruption Perceptions Index, indicating a high risk of corruption in business transactions.

EDC carefully reviewed the transaction, making a field visit to the company to understand its practices to deter corruption. We found no indication of inappropriate payments in the deal EDC was asked to support. In the end the deal did not conclude for other reasons.

While there are tangible laws against corruption and international standards relating to environmental assessment on which to base our decisions, the guide posts are more obscure when human rights concerns are involved. EDC is supporting and cooperating with Dr. John Ruggie, UN Special Representative for Business and Human Rights, to help develop a human rights assessment process for transactions. Still, experience and judgment remain key elements in decision-making.

For example EDC was asked to provide financing for the sale of Canadian surveillance equipment to a foreign government. We knew the equipment would be used by security forces, members of which had been implicated in severe human rights abuses. In addition it was unclear how or if access to the surveillance equipment - or video footage - would be controlled. Given the security forces' record of past mismanagement and abuses, we concluded it was likely that receipt of this equipment could worsen an existing poor human rights situation. We declined support.

For financial institutions each case must be reviewed on its own merits, within the context of their own laws as well as international laws and standards. Our goal is to find a balance between ensuring our own house is in order and helping companies operating abroad to do business responsibly. This is more important than ever as trade and investment become more international and transactions more complex.

This article is excerpted from a recent speech by Jim McArdle, Senior Vice-President, Legal Services and Secretary, EDC, to the EthicsCentre CA.

This commentary is written by a valued member of the CSRwire contributing writers' community and expresses this author's views alone.

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