Training
Needs Assessment in Business Ethics and Corporate Governance Improvement.
(TNA)
Download Questionnaire
The “Training
Needs Assessment in Business Ethics and Corporate Governance” Survey
was conducted within the framework of CFBE’s Eurasia Foundation and
USAID grant projects.
The main purpose
of the survey is to identify the following:
• Recognition
level of “corporate governance” and “business ethics” terms
• Knowledge level of corporate governance principles
• Level of companies awareness about FCSM Code of Corporate Governance
• Level of implementation of FCSM Code’s recommended corporate governance
practices
• Obstacles for code implementation
• Effectiveness of training programs in corporate governance and business
ethics
• Steps necessary for improving training programs in corporate governance
anvud business ethics
Term
of Project
The project team began work in August 2003. All questionnaires were
collected by December 10, 2003.
Selection
Criteria
Participating in the process were public joint stock companies from
Saint Petersburg and the North West Region who have shown their commitment
to improving corporate governance, or who have declared their intention
(in the Press or on the Internet) to implement FCSM Code provisions.
Companies received information about this project mostly through regional
Departments of Commerce and Industry, the mass media, and the Internet.
36 Questionnaires
Collected
Companies refusing to take part in the survey cited lack of interest,
rejection by management, or stress of day-to-day operations as reasons
for nonparticipation.
Survey
Participants
The main participants were large industrial joint stock companies.
• 11% had fewer
than 100 employees
• 29% had 100 to 500 employees
• 39% had 500 to 5000 employees
• 21% had more than 5000 employees.
In terms of industries
represented, the two single greatest concentrations were 23% from
the industrial appliance, engineering and “electro-technology” industries,
and another 23 % representing the food and tobacco industries; the
rest were scattered across a variety of other sectors including construction,
pulp and paper, water transport, power, oil and gas, and numerous
other industries
Who Answered
the Questionnaires?
Half the respondents were representatives of top management with direct
involvement in corporate governance procedures, such as CEOs, board
members, heads of Corporate Governance and Development Department.
The other half consisted of high level managers, such as financial
directors and staff directors, who do not work directly in corporate
governance areas.
Survey
Results
The survey showed that most respondents have a good understanding
of “corporate governance” as a term. However, 25 % of respondents
understand “corporate governance” simply as “management of a public
company,” ”general management,” or “management inside the organization.”
Most of the companies
have a strong awareness of corporate governance principles.
Principles cited
most frequently:
• Safeguarding shareholder rights – 75% of respondents
• Transparency of information -41%
• Transparency of ownership structure -15%
• Control of financial and economic activities – 15%
• Employees’ rights – 11%
5 participants
listed all the principles described in the FCSM Code, or made explicit
reference to the Code.
Most of the companies
declare a policy of promoting good corporate governance, but there
is some variety as to where these policies are set down:
• 53% - in the mission statement
• 47% - in the company’s charter
• 24% - in the company’s internal code of corporate governance
At the same time,
70% of respondents note that compliance with declared principals is
still only partial, whereas 18% consider practices to be in complete
harmony with stated policies.
High level of
awareness of FCSM Code:
• 35% - have read the FCSM Code from cover to cover
• 38% - have read the FCSM Code in part
• 18% - have heard about the FCSM Code, but have never read it
• 9% - not even aware of the FCSM Code
Low level of
implementation of corporate governance practices recommended by the
FCSM Code. Only 35% of respondents supplied an answer to the question:
“Is your company in compliance with the FCSM Code?” Of those who answered:
• 33% - stated full compliance with the Code
• 33% - stated partial compliance with the Code
• 25% - stated that company’s policies are not Code-compliant
• 9% - do not know
69% of respondents
remarked that they have no executive body to ensure compliance with
the FCSM Code.
The same percentage reported having no program to improve corporate
governance practice.
But passing the
FCSM Code in April 2002 caused several positive changes:
• 42% of respondents said that they started to devote more time to
corporate governance procedures
Most companies
have started to pay more attention to disclosure of information. For
example, 45% respondents already prepared reports according to Generally
Accepted Accounting Principles, and 36% have announced plans to do
so.
The main barriers
to widespread compliance with the FCSM Code, as gleaned from survey
respondents (from most frequently cited to least):
• Lack of information on how to implement the FCSM Code and on the
advantages of doing so
• Business culture in Russia is underdeveloped
• Not enough time to focus on compliance
• View code compliance as unnecessary or irrelevant
• Belief that such standards could never take root in Russia
Needs
in Corporate Governance Training
All participating companies said they are in need of corporate governance
training.
Survey findings
suggest the following target audience:
• Chief Executive Officer (General Director, President)
• Board of Directors
• Corporate Secretary, Corporate Governance Department staff, and
other related positions
• Public Relations Manager
• Corporate lawyers
• Other high-level managers
The most important
spheres for training are:
• Internal financial controls
• Corporate conflicts
• Ethical behavior, openness, and trust
• The role and functions of the Board
• Risk management procedures
• Compliance with the law
• Shareholders’ rights
The following
spheres were also mentioned:
• Training for Corporate Secretary
• Development of practical procedures to introduce corporate governance
into day-to-day operations
Most respondents
stressed the importance of hands-on training. The following themes
merit special attention:
• Putting corporate governance principles into practice
• Typical solutions, recommendations
• Russian/foreign examples of best practices
Only 50% of respondents
currently have training programs in place. Of this group, 32% employ
external trainers.
Training organizations
used most frequently (in descending order of popularity):
• Russian Institute of Directors
• Corporate Governance Institute
• Center For Supporting Corporate Governance And Business
• Higher Institute Of National Economy And Corporate Governance Of
The Government Of The Russian Federation.
Business
Ethics
“Effective corporate
governance is one that is based on a core set of ethical principles
that guide the company's actions, whether to rollout a new product
or raise new capital. It establishes a framework for effectively assessing
risk and detecting and preventing fraud and abuse by corporate insiders.”
Susan B. Hollinger,
Shareholder-Director of Gallagher,
Callahan & Gartell, PA
Understanding
the Terms
In the survey, the term “business ethics” was usually understood,
correctly, as ethics of business conduct, but respondents occasionally
confused it with “business etiquette.”
Compliance
with Business Ethics Standards
67% of respondents have no business ethics program. 33% have a program
outlined in their Code of Ethical Behavior, ethical standards, corporate
culture documents, and others. However, such business ethics programs
often exist only on paper and are never used in day-to-day work.
50% of respondents
have observed violations of ethical standards by their managers or
colleagues. In many cases, the violator was not punished according
to specified company procedures. Instead, the matter was just discussed
among colleagues, and never officially settled.
Question: “How
ethical are your company’s dealings with customers, suppliers, distributors,
society, owners, state, management, employees, and employees’ families?”
Respondents replied that their companies are:
In total compliance with ethical standards in relationships with:
• Owners – 53%
• Society – 47%
• Customers – 44%
In compliance
for the most part in relationships with:
• Employees – 56%
• Management – 47%
• Suppliers – 47%
• State – 44%
The most serious
observed violations of business ethics principles are:
• Bribes / kickbacks
• Disclosure of confidential information
• Theft
77% of companies
consider that business ethics training is a necessity. The most important
training areas are:
• Russian best
practices
• Conflict resolution
• Reward and discipline systems for ethical and unethical behavior
• International best practices for implementation of business ethics
standards
• Developing and implementing business ethics standards
• Psychological aspects of standards implementation – how to engage
employees and encourage voluntary participation
Main
Findings
• Most respondents
are well aware of corporate governance principles
• Most respondents declare that their company has a corporate governance
policy, but only 18% consider existing management practices to be
fully aligned with declared principles, whereas 70% regard compliance
as only partial
• High level of awareness of FCSM Code
• Low level of implementation of the Code’s recommended corporate
governance norms
• Main barriers to fuller compliance with the FCSM Code are:
1. Lack of specific
information about Code implementation and the advantages of implementation
2. Business culture in Russia is underdeveloped
• There is a
serious need for training programs in corporate governance and business
ethics
Conclusion
Survey results demonstrate awareness in the progressive Russian business
community that higher standards of corporate governance and full compliance
with the FCSM Code are essential to achieving sustainable growth,
increasing market value, and attracting investment.
_______________________________________
* “Corporate Governance – is a system
of interaction and mutual accountability between shareholders, Board
of Directors, managers and other stakeholders (employees, creditors,
supplies, local authorities, public organizations and so on), which
aimed to increase profit with respecting to applicable legislative
and international standards.” (Adopted from IFC)
Corporate
governance basic principles:
1. Respect
shareholders rights.
2. Equal attitude to shareholders, who own equal amount of the same
shares type.
3. Board of Directors:
• Strategic
governance of JSC,
• Effective control for executive bodies of JSC.
4. Executive
bodies:
• Reasonable,
fairness, effective governing with respect to companies interests.
• Accountability.
5. Disclosure
full and accurate information about JSC.
6. Respect stakeholders rights.
7. Effective control for financial and economic activities of JSC.
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