BUSINESS ETHICS AND ANTICORRUPTION PRACTICES IN LITHUANIA : REALITIES AND INITIATIVES

1. BUSINESS ETHICS AND ANTICORRUPTION PRACTICES IN LITHUANIA:REALITIES AND INITIATIVES Sergej Muravjov www.transparency.lt

2. A national instrument of TI Lithuania – research ofthe perception and experience of corruption by Lithuanian residents and businesspeople

3. Evaluation of the level of various social importance problems Company managers Residents 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. Scale: 1 – not a problem at all, 2 – not a particularly serious problem, 3 – a rather serious problem, 4 – a very serious problem

4. 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

5. What do Lithuanian business people think about bribes? Lithuanian Map of Corruption 2001-2005

6. 77% 60% 37% 20% 3% 3% Have not given Have given N/S Have not given Have given N/S Frequency of bribe-giving Have you given a bribe in the last 5 years? Have you given a bribe in the last 12 months? Have you given a bribe in the last 5 years? Have you given a bribe in the last 12 months? Company managers Lithuanian Map of Corruption 2001-2005

7. Would you inform about corruption? Lithuanian Map of Corruption 2001-2005

8. 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] ANTICORRUPTION INITIATIVES [ there is an increasing number of businesses that express willingness to take part in sectoral transparency initiatives] CSR INITIATIVES

9. BUSINESS AND SOCIETY ( 21 CENTURY ) unenlightened self-interest 84 %[business people believe that business should seek profit while also contributing to the well-being of the society] enlightened self-interest 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] Source: The McKinsey Quarterly (2007)

10. Is CSR important? The McKinsey Quartely research (2007): 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 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 (2) media (3) increasing transparency about the risks of products and processes

11. How do Lithuanian business people understand business ethics and CSR initiatives? CONDUCTED STUDIES: World Bank (2005)EKT group study (2007)UNDP regional project (2007) • 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

12. Small and medium enterprises in Lithuania EKT Group study (2007) 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

13. Development stages of responsible business in Lithuania towards sustainable business ethical, social responsibility and sustainability principles are integrated into corporate functions, goals and strategy LT? towards Investments in the community strategic partnerships initiated by the company towards relationship with the community strategically weighted actions that accommodate communal insterests towards philanthropy company passively provides aid when asked from profitcompany exists just to fulfill short-term interests of its share-holders

14. ANTICORRUPTION INITIATIVES IN PRIVATE SECTOR State Technical Vehicle Inspectorate transparency study (2006) [TRANSEKSTA, TILS, JTVP ] “More Integral Medical Treatment” study (2007) [ TILS, Association of Ethical Pharmaceutical Companies, Association of Drug Producers, LR Ministry of Health, Union of Lithuanian Doctors] Transparency in Construction Sector Study (2007-2008) [ TILS, EIKA, REALTUS, YIT KAUSTA] “Towards Transparent Media” project (2007) [ NORDEN, TILS ] PARTNERS: SIDA, ECCJ, OECD Watch, TI

15. Greater integrity in medical treatment (2007) PHARMACOMPANIES’ CONCERNS WITH DOCTORS • 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?

16. Greater integrity in medical treatment (2007) 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] 27%[communicated 6-25 times per month] 85%[doctors received inexpensive gifts ] 74%[respondents received scientific literature]

17. 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]

18. Transparency in Construction Sector (2007-2008) 80 % of businesspeople believe that connections with state officials responsible for territorial planning and constructions are important60 % of businesspeople think that bribes are effective 32 % businesspeople state that municipal officials are the ones who ask for a bribe most often

19. Transparency in Construction Sector (2007-2008) Proposed transparency instruments: 72 % - stricter rules and regulations70 % - electronic system that manages granting of construction permits 67 % - electronic system that manages territorial planning66 % - a differentiated payment to speed up administrative procedures

20. 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.

21. 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.

22. 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.