1. Presentation by Kathryn Gordon
4/4/2019
Global Forum V – Session on Voluntary Initiatives for the Private Sector Conducting business with integrity in weak governance zones
Presentation by Kathryn Gordon
Senior Economist, OECD Investment Division

2. What is a weak governance zone (WGZ)?
4/4/2019
What is a weak governance zone (WGZ)?
An investment environment in which governments cannot or will not assume their responsibilities: protecting rights, providing basic public services and ensuring that public sector management is efficient and effective .
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3. RISKS AND ETHICAL DILEMMAS IN WEAK GOVERNANCE ZONES
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RISKS AND ETHICAL DILEMMAS IN WEAK GOVERNANCE ZONES
Government failures lead to broader failures in political economic and social institutions
In addition to the usual financial and business risks, WGZ pose special risks that stem directly from government failure
The WGZ Tool seeks to help companies face these risks .
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4. Multilateral credentials for WGZ project
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Multilateral credentials for WGZ project
A major political issue – 15 per cent of the world’s people live in WGZ
UN Security Council request
G Summit mandate
OECD value added relative to other multilateral processes
4/4/2019

5. DEVELOPMENT OF THE TOOL
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DEVELOPMENT OF THE TOOL
Extensive multi-stakeholder consultation, including with WGZ investors
Face to face meetings in Paris
Two web-based consultations
Major pan-African meeting in Addis Ababa in early 2005
ILO, UN Global Compact participation
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6. 4/4/2019
SUBJECT AREAS COVERED
Obeying the law and observing international instruments
Heightened managerial care
Political activities
Knowing clients and business partners
Speaking out about wrongdoing
Business roles in weak governance societies – a broadened view of self interest
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7. OBEYING THE LAW
Companies have the same broad responsibilities in WGZ as they do in other investment environments – they are expected to obey the law and to observe other international instruments covering human rights, anti-corruption, labour management and environmental protection.
4/4/2019

8. HEIGHTENED MANAGERIAL CARE
The heightened risks encountered in WGZ create a need for heightened managerial care.
Heightened care consists of reinforcing the risk management techniques routinely used in other investment contexts: board level involvement, gathering information, assessments, building in safeguards, human resources management.
4/4/2019

9. POLITICAL ACTIVITIES
Excessive discretion for political leaders – a key symptom of weak governance
Hard for investors to argue they are apolitical
Avoid illegal political involvement under OECD anti-bribery convention
Thinking about legitimate political activity
Thinking about dealings with public officials having flagrant conflict of interest
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10. KNOWING CLIENTS AND BUSINESS PARTNERS
Asks for heightened care in managing risks of entering into business relationships with criminal elements
Extensive reference to major private initiatives: Wolfsberg AML standards, OGP Guidelines on Reputational Due Diligence.
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11. SPEAKING OUT ABOUT WRONGDOING
Tool recognises the risks of speaking out about wrongdoing
They are asked to weigh the risks, both of speaking out and of failing to do so
Availability of whistle-blowing facilities (e.g. home country diplomatic networks)
Need for partnership in speaking out (EITI is a best practice example)
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12. A BROADENED VIEW OF SELF INTEREST
Is there a role for business advocacy for public sector reform?
Possibly, but it is by no means certain
Examples of advocacy – promoting better governance practices with WG state-owned enterprise sector; promoting integrity enhancing institutions (e.g. by being an active member of local chambers of commerce)
4/4/2019

13. PHASE II – HELPING COMPANIES ANSWER THE QUESTIONS
OECD-NEPAD Investment Initiative
Sector-specific follow up
The OECD Investment Committee is developing a follow up strategy for the WGZ Tool – it welcomes your ideas
4/4/2019