BUSINESS ETHICS AND ANTICORRUPTION PRACTICES

IN LITHUANIA: REALITIES AND INITIATIVES

www.transparency.lt

Sergej Muravjov

A national instrument of

TI Lithuania – research of

the perception and

experience of corruption

by Lithuanian residents

and businesspeople

3.45

3.39

3.29

3.10

2.94

2.92

2.63

2.60

3.42

3.40

Emigration from Lithuania

Corruption

Drug abuse

Crime/violence

Small salaries

Environmental problems

Insufficient social support

High prices, inflation

Prostitution

Unemployment

Evaluation of the level of various social importance problems

ResidentsCompany managers

Scale: 1 – not a problem at all, 2 – not a particularly serious problem, 3 – a rather serious problem, 4 – a very serious problem

The importance of corruption, as one of the most serious social problems, is emphasized both by residents and company managers.

Residents consider small salaries and crimes/violence and company view emigration from Lithuania managers as more important problems than corruption.

3.65

3.64

3.57

3.44

3.28

3.23

3.23

3.06

2.98

3.58

Small salaries

Crime/violence

Corruption

Drug abuse

High prices, inflation

Unemployment

Emigration from Lithuania

Insufficient social support

Environmental problems

Prostitution

What does Lithuanian business think of corruption?

70.4 % believe or most likely believe that corruption is an obstacle for business

16.9 % believe that corruption has no influence on business development

Lithuanian Map of Corruption 2001-2005

What do Lithuanian business people think about bribes?

Lithuanian Map of Corruption 2001-2005

Have you given a bribe in the last 5 years? Have you given a bribe in the last 12 months?

Company managers

77%

20%

3%

Have not given Have given N/S

60%

37%

3%

Have not given Have given N/S

Lithuanian Map of Corruption 2001-2005

Have you given a bribe in the last 5 years? Have you given a bribe in the last 12 months?

Frequency of bribe-giving

Would you inform about corruption?

Lithuanian Map of Corruption 2001-2005

WHAT INITIATIVES DO WE HAVE IN LITHUANIA?

“UMBRELLA” CODES OF ETHICS

[ businesses say that they understand the usefulness of codes of ethics to their reputation but make little use of them in practice ]

CSR INITIATIVES

ANTICORRUPTION INITIATIVES

[ there is an increasing number of businesses that express willingness to take part in sectoral transparency initiatives ]

BUSINESS AND SOCIETY ( 21 CENTURY )

84 % [ business people believe that business should seek profit while also contributing to the well-being of the society ]

48 % [ believe that environment protection and global warming issues will have the

greater influence on their company value ]

38 % [ believe that increasing transparency of their company is the most effective single instrument that can improve

the reputation of their company ]

enlightened self-interest

unenlightened self-interest

The McKinsey Quarterly (2007)Source:

The McKinsey Quartely research (2007):

Is CSR important?

More than one-third of the same business people believe that the best way to achieve the same results is:

(1) developing, implementing policies on ethics and other CSR standards

More than one-third business people solve their social and political issues with the help of:

(1) media, (2) lobbying, (3) improving compliance with laws and regulations

HOWEVER

(2) media

(3) increasing transparency about the risks of products and processes

How do Lithuanian business people understand business

ethics and CSR initiatives?

there are no cultural obstacles

there is no resistance on behalf of employees

do not see any economic enticements

lack state support

do not see initiatives that would support socially responsible business

profit-making is essential – no “win-win” view on business activities

payment of taxes

following the law

securing work safety

employee health care

World Bank (2005)

EKT group study (2007)

UNDP regional project (2007)

CONDUCTED STUDIES:

Small and medium enterprises in Lithuania

81% [ Lithuanian SMEs think that businesses play

a very important role in the society ] 53% [ know what CSR is ]

28% [ SMEs carried out CSR related activities ]

“step by step” approach

EKT Group study (2007)

Development stages of responsible business in Lithuania

fromprofit company exists just to fulfill short-term interests of its share-holders

towards philanthropy company passively provides aid when asked

towards relationship with the community strategically weighted actions that accommodate communal insterests

towardsInvestments in the communitystrategic partnerships initiated by the company

towards sustainable business ethical, social responsibility and sustainability principles are integrated into corporate functions, goals and strategy

LT?

ANTICORRUPTION INITIATIVES IN PRIVATE SECTOR

State Technical Vehicle Inspectorate transparency study (2006)

“More Integral Medical Treatment” study (2007)

Transparency in Construction Sector Study (2007-2008)

“Towards Transparent Media” project (2007)

[ TRANSEKSTA, TILS, JTVP ]

[ TILS, Association of Ethical Pharmaceutical Companies, Association of Drug Producers, LR Ministry of Health, Union of Lithuanian Doctors ]

[ TILS, EIKA, REALTUS, YIT KAUSTA ]

[ NORDEN, TILS ]

PARTNERS: SIDA, ECCJ, OECD Watch, TI

Greater integrity in medical treatment (2007)

PHARMA COMPANIES’

Too much money spent on marketing?

Bad example – bad reputation?

Bad reputation will jeopardize future profits?

Lower confidence in pharmaceutical products; regulations will only become stricter?

Cannot pay facilitation payments any longer?

CONCERNS WITH DOCTORS

19% [ doctors believe that those responsible for medical recommendations often favor one particular company ]

23% [ doctors noticed that over the past 12 months at least one drug was unreasonably taken out from the list of state compensated drugs ]

65% [ doctors communicated with pharma company representatives 1-5

times per month over the past 12 months ]

85% [ doctors received inexpensive gifts ]

74% [ respondents received scientific literature]

27% [ communicated 6-25 times per month ]

Greater integrity in medical treatment (2007)

Who are threatened by non-transparent relations between doctors and pharmaceutical company representatives?

65 % [ believe it is the doctors reputation ]

54 % [ believe that it is the pharmaceutical company reputation that suffers ]

55 % [ believe that it is patients wallets that suffer the most ]

35 % [ believe that it is patients health that suffers the most ]

Transparency in Construction Sector (2007-2008)

80 % of businesspeople believe that connections with state officials responsible for territorial planning and constructions are important

60 % of businesspeople think that bribes are effective

32 % businesspeople state that municipal officials are the ones who ask for a bribe most often

Transparency in Construction Sector (2007-2008)

Proposed transparency instruments:

72 % - stricter rules and regulations

70 % - electronic system that manages granting of construction permits

67 % - electronic system that manages territorial planning

66 % - a differentiated payment to speed up administrative procedures

The results of the media integrity project (2007)

91 % [ business people believe or more likely to believe that unfavorable media can destroy personal reputation and

the company ]

To bribe media by advertising a lot or just paying for silence.

To make the problem seem smaller or just show that the a problem is unclear is very small.

To transfer the guilt to the state and the society.

WHAT SHOULD YOU START FROM?

intersectoral dialogue and partnership;

partnership with non-governmental sector;

evaluation of company performance;

consultations with specialists;

creation of new business processes and innovations.

TI BUSINESS PRINCIPLES (2003, 2008)

BUSINESS COMMITS:

to act honestly and transparently,

not to offer bribes directly or indirectly,

not to accept bribes directly or indirectly,

to prepare a program that would allow it to implement TI principles.