Project Management Institute

Code of conduct

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Bronwyn Best, Transparency International Canada, Toronto, Ontario, Canada

by Tegan Jones photo by Nadia Molinar

Business ethics have always been maddeningly difficult to define. What's common practice in one country may be illegal other. And as more multinationals pour into emerging markets, the issue separating right from wrong is becoming even more complicated.

Given the developing nature of regulatory and governing bodies in developing markets, the rules for doing business can often seem contradictory or overly complex to a project leader unfamiliar with the locale. PMI's Code of Ethics and Professional Conduct defines fairness, honesty, responsibility and respect as they relate to the project management profession. But it's up to individuals to integrate those values into the project at hand. And that can't be done without a true understanding of the local culture.

rules of engagement

For companies looking for some ethical guidance, here are some of the more widely used standards:

PMI Code of Ethics and Professional Conduct www.pmi.org/PDF/AP_PMICodeofEthics.pdf

- Requires a commitment to honesty, fairness and transparency from all PMI-related professionals

- Defines and offers insight into dealing with conflict-of-interest situations

International Organization for Standardization 1400

www.iso.org

- Provides the framework for a strategic approach to an organization's environmental policies, plans and actions

- Outlines requirements and sets guidelines for a compliant environmental-management system

Account Ability 1000 www.accountability21.net

- Helps organizations build accountability through social and ethical accounting, auditing and reporting

- Guides users on how to integrate stakeholder engagement into their daily activities

Social Accountability 8000 www.sa-intl.org

- Defines non-compliant activities, such as forced and child labor, discrimination and insufficient remuneration

- Offers guidelines for safe and healthy work environments

International Accounting Standard 29 www.iasb.org

- Explains the ethical financial reporting techniques to be used in hyperinflationary economies

- Ensures the proper currencies are used when companies report business transactions

Of course many of the ethical issues businesses face in emerging markets, are no different than those found in the developed world. Yet the way they play out varies by location—and without the proper transparency, expatriate companies risk supporting illegitimate practices they could easily avoid on their home turf. It's easiest for project professionals to adhere to the code when their organizations both understand the local culture and promote ethical practices.

Given the varied nature of unethical business practices, executives and project leaders on the ground must promote strict reporting processes to ensure their work remains on the level. And PMI members, certificants and volunteers have to remain accountable to PMI's ethics code, regardless of what is commonly practiced locally—or even within their own companies.

One prime spot where companies struggle is in dealing with questionable competitive practices. Leon Tripp, PMP, sometimes finds himself going up against rivals that favorably frame their proposals by leaving out crucial pieces of information.

“There are many companies that offer a little piece of the project and when they finally deliver the solution they say, ‘Oh, now you'll need another service,’” says Mr. Tripp, consultancy manager at Alpha Consultoria, Mexico City, Mexico.

Even after they've secured a contract, the ethical battles continue. For instance, many of the consultancy's clients in Latin America are accustomed to receiving gifts or free services in exchange for their business, so Mr. Tripp must then explain company policy prohibits such transactions.

A FEEL FOR THE LAND

Without extensive experience in a region, it can be difficult for project leaders to differentiate a cultural nicety, such as an invitation to dinner, from a true ethical dilemma, such as a bribe.

The best way for companies to prepare themselves for work in any new market is to look at both local law and international best practices, says San Francisco, California, USA-based Igor Abramov, counsel at Heenan Blaikie, a Canadian law firm.

And that analysis starts during project selection.

Before choosing a site location, companies should examine local licensing and regulatory requirements, tax-collection systems and intellectual property laws to get a sense of how the government functions. The strength of the court system can often provide a gauge of the country's ability to deal with business disputes.

Generally, more transparent and straightforward business policies create fewer opportunities for corruption among inspectors, auditors and other government officials, Mr. Abramov says.

But project locations can't be selected for their governance policies alone. Many companies, especially those in extractive industries such as oil and gas development, have to go where the resources are.

In those situations, executives should try to build as much transparency into the project as possible, says Matthew H. Murray, cofounder of the Center for Business Ethics and Corporate Governance in St. Petersburg, Russia.

“To help implement projects, [companies] should identify local partners that have an established track record and are willing to share all information pertinent to assessing and minimizing corruption risk,” he says.

Since April 2007, Mr. Murray has been on assignment as corruption risk manager for the Moscow, Russia-based oil company TNK-BP Management Ltd.

Part of Mr. Murray's responsibilities called for developing an enterprise-wide internal compliance program that covers:

  • Principles of business operation
  • Conflict-of-interest protocols
  • Gift-giving regulations
  • Fair competition practices.

localvalues

One of the first lessons learned for any project leader is to listen to stakeholders. But in emerging markets, understanding what's actually being said often requires more than a literal translation.

Local populations often see new projects in their communities as either threatening their way of life or providing an opportunity to make some money off a wealthy foreign business. So what they tell project managers may not always be what they mean.

And if project leaders don't get the community on board with their initiative early in the process, conflicts can spark delays—and ethical dilemmas.

Michael Idoko, PMP, acting program manager at the Center for Project Management in Abuja, Nigeria, has seen this scenario play out when it's time to pick a project site. Jockeying for a piece of the action, several people will often lay claim to a single piece of land.

That means effective site acquisition in rural areas demands more than just transferring a title. If due diligence is not followed and the wrong person is compensated for the land, companies could find themselves responsible for misappropriating local resources.

To limit such disputes, project leaders must build solid ties within the community and demonstrate how their project will benefit local stakeholders, Mr. Idoko says. If they see how an initiative can improve their lives or offer new opportunities, locals will be more likely to help the project move forward.

“Overcoming these challenges demands exhaustive identification and orientation of all project stakeholders during the planning phase,” he says. “Where possible, the locals need to be hired to work with the project team. In the past, I have hired them to provide security services at the project sites … to give them some sense of belonging—and this works.”

TIP

Set the bar high.
“You have to be a learning organization that assesses the values of each location in which you operate and integrates these values into the highest standards you have at your company. And you have to do that step by step, without setting false expectations or trying a one-size-fits-all approach.”

-Matthew H. Murray, Center for Business Ethics and Corporate Governance, St. Petersburg, Russia.

“It's better to adopt the highest standard,” he says. “That way, businesses are in a stronger position to detect risk and ensure compliance in all situations.”

The goal is to help the company—the first Russian signatory of the World Economic Forum's Partnering Against Corruption Initiative—develop a culture of transparency and compliance.

Since March, however, the relationship between TNK-BP's two major shareholders, Moscow-based Alfa Access Renova and U.K.-based BP, has begun to fray. An escalating dispute over the company's management, ownership structure and business strategy has created conflict between the shareholders and forced several foreign employees, including TNK-BP CEO Robert Dudley, to leave Russia.

Yet even in a volatile corporate climate, project leaders can and should endeavor to ensure their ethical practices will prevail, Mr. Murray says.

“A healthy and successful company should look at a crisis as an opportunity to strengthen its ethics compliance practices,” he says. “The tools of business ethics include good communication, strong accountability and a culture where every participant has a voice. These are the same tools you sometimes need to get out of a crisis.”

WARNING SIGNS

Perhaps most importantly, companies working in emerging-market nations need to abide by local laws. Inadvertently, companies can sometimes find themselves fueling corrupt practices by simply conducting what they feel is business as usual.

In the United States, for example, paying to have a routine governmental service expedited is a perfectly legal transaction. But in Russia, the same payment is considered an illegal bribe.

It's these types of cross-cultural miscues that greatly contribute to many of the ethical problems in emerging markets today, Mr. Abramov says. Large-scale investors can often alienate their local partners by demonstrating a seeming ignorance of or disinterest in the local legal framework. This could not only create unrest within the operational community, it can undermine the legitimacy of a country's developing regulatory framework, he explains.

“What I hear in my travels in emerging countries is that foreign companies and foreign donors are major factors in making corruption endemic in their countries,” Mr. Abramov says. “Over the long term, such perceptions, however untrue they may be, can have a debilitating effect and destroy public confidence in

Western companies—and in the legal process as well.”

To ensure regulations are followed, companies must communicate standards to their project leaders and team members as well as to their contractors and supply chain partners. Then, they must verify that those standards have been understood.

Everyone working on the project must be taught how to recognize potential ethics issues and communicate that danger upward, Mr. Murray says. Some obvious warning signs of corruption include payments going to offshore accounts or any suggestion that hiring a specific individual or organization would speed up the execution of a project. But for the training to work, project team members need to feel comfortable reporting anything that seems amiss to their immediate supervisors, he says.

If reporting warning signs is seen as a regular part of the job, Mr. Murray says, team members will be less anxious about being labeled a “whistleblower.”

Project leaders may also want to meet with team members individually.

This kind of governance buy-in should extend throughout the supply chain as well. For suppliers to understand the importance of adopting a company's ethical standards, the organization must be clear about how its partners' efforts relate and contribute to its corporate vision.

“If suppliers feel pride that they're part of a great company, they start acting that way,” says Mr. Abramov.

That process begins by obtaining written statements from subcontractors outlining their commitment to principles such as specific labor standards, policies and expectations—and ensuring they receive a commitment from their subcontractors as well, says Mr. Abramov.

“[Organizations] should develop an implementation plan with short-, medium- and long-term steps,” he says. “[They should] focus on improving conditions over time through incremental advancements, rather than trying to resolve the issue immediately.”

By outlining realistic timelines for change and working with both local and international partners to define universally accepted ethical standards, project leaders can create results that benefit everyone involved.

Although companies may have to walk away from the occasional deal to uphold principles, building a reputation of integrity creates more economic benefits than losses in the long run, says Bronwyn Best, executive director of Transparency International Canada in Toronto, Ontario, Canada.

“People want to do business with organizations they can trust,” she says.

It's a delicate balance that requires firms to be flexible and appreciate that there's more than one way of approaching something, Ms. Best says.

“In today's global society, a company will need to take on a global corporate cultural mantle different from that of their head office,” she says. “But there is no country in the world that would say corruption is part of their culture.”

Corruption may not be part of any nation's culture, but companies may still have to deal with it—at least for now. Yet Ms. Best predicts it's only a matter of time before stakeholders begin to more actively challenge businesses that operate unethically.

“Different cultures have different levels of tolerance for corrupt behavior,” she says. “When that tolerance is breached, the general public will demand transparency and accountability from its public officials and its businesspeople.” PM

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM NETWORK OCTOBER 2008 WWW.PMI.ORG
OCTOBER 2008 PM NETWORK

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