17 January 2012
Trustworthiness is the essence of good government. People will trust a government that is seen to act with integrity and require integrity standards from its officials. Integrity standards involve managing conflicts of interest. At its core that involves subordinating personal interests to those of the community. States recognised for their good government, are reasonably good at entrenching a culture where agencies operate transparently and the selflessness of their staff engenders trust and confidence.
Capitalism promises economic advancement by stimulating entrepreneurship and innovation. Enterprise is rewarded. Building business is incentivised. Those incentives can encourage opportunism and cutting corners. Deals are done.
There is a widespread fudging of the interface where business people provide hospitality and gifts to officials. They do so for commercial reasons. They seek to establish a relationship with decision-makers; ie they buy attention. More blantantly they seek favourable consideration as a provider of goods or services. Of course the benefits presented to officials are almost never gifts from the donor’s taxed income, but are funded as tax deductible expenses by the business seeking a government contract. The beneficiaries too readily rationalise such gifts – they are not influenced; their independence is not swayed by an evening’s entertainment; to suggest they would be subborned is laughable. The inference is that they are different from the subjects of all research about how gifts influence our sense of obligation and reciprocity.
The State Services code of conduct seeks to minimise the fudging of that influence and hence the acceptability of gifts. The Standards that exemplify the need to be trustworthy include –
- We must ensure our actions are not affected by our personal interests or relationships
- We must never misuse our position for personal gain
- We must decline gifts or benefits that place us under any obligation or perceived influence
- We must avoid any activities, work or non-work, that may harm the reputation of our organisation or of the State Services
The effect is to prohibit activities that create a conflict of interest. The guidance is that we must always be aware of how others see things, and do nothing that advantages ourselves or those with whom we are connected. The Crown Entities Act is much more explicit about when we become interested, specifying relationships which will inevitably influence the perceptions others have of influence, even if we convince ourselves that we are not influenced.
The experience this week of the chair of the Swiss National Bank is educational. A longstanding international banker, unquestionably familiar with the integrity requirements of that profession, has had his world turned upside down because of public perceptions about his trustworthiness.
As bank chairman he was deeply involved in reducing the value of the Swiss franc against the dollar. His wife is an economist. She bought a large parcel of dollars just days before the bank intervened in the market, realising a substantial profit. Media reporting created an uproar. A politician called for his resignation. The banker refused. He claimed he knew nothing. He was not responsible for his wife’s acts. He donated the trading profit to a charity. He offered to make public all his previous currency trades… but didn’t actually do so. Despite support from fellow bankers in Europe, a press description of him as “sincere, honest, transparent and of good faith”, and a PricewaterhouseCoopers report that there was “nothing illegal” in his wife trading, the banker’s goose was cooked.
He apologised. He explained that he knew nothing until after the trade. He instructed the bank not to trade without his approval. But these fell on deaf ears. People saw a conflict. Trust had evaporated. Within a week of refusing to do so, he has resigned.