Since he joined the World Bank Group three years ago, Jorge Dajani has implemented a variety of changes and reforms to make the global institution more trustworthy to all of its stakeholders. In this piece, Dajani discusses how transparency, both in processes and from people in leadership, help to make the institution more accountable to stakeholders including its own employees.
For corporations and institutions worldwide, achieving a sustainable business model is essential. Ensuring that your business is resilient, adaptable, socially responsible, and profitable in the long term has become the key demand of major stakeholders. Long gone are the days when the profit line determined everything shareholders needed to know to be at ease with their investment. Back then, accountability to shareholders focused on the principal-agent problem, where it was critical to establish remuneration schemes that would align the interests of management and shareholders.
In the last two decades many shareholders have seen the value of their otherwise profitable companies plunge due to fraud, accounting irregularities, unethical behavior by management, or reputational damage from subpar environmental and social policies. Indeed, recent failures in the field of corporate governance and business ethics have brought to light the need for a more comprehensive approach and the direct involvement of senior management and boards of directors in the ethics of business activities—in other words, corporate responsibility.
Corporate responsibility has become a key factor in the achievement of the United Nations’ 17 Sustainable Development Goals as set in the 2030 Agenda for Sustainable Development. Corporate responsibility is also at the core of the environmental, social, and governance (ESG) criteria being used in management and investors to evaluate companies and institutions. Why is corporate responsibility so relevant? Because it can bolster stakeholders’ perception of trust—a major driver in the success of any business.
The Business Roundtable agreement of 2019 is a clear move towards a framework in which stakeholders are defined in much broader terms than only shareholders. The “Statement on the Purpose of a Corporation” was signed by nearly 200 chief executive officers of the world’s leading companies with the intention to “move away from shareholder primacy,” towards a commitment to “all stakeholders,” including customers, employees, suppliers and communities: “We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”
Accountability to all stakeholders is therefore the key for any successful and sustainable business to generate trust and eventually be sustainable. Accountability towards stakeholders can take many forms and be delivered through different mechanisms. As an example, the World Bank Group has recently adopted numerous initiatives to reinforce internal accountability to employees.
Accountability for core values
Being accountable for upholding an organization’s values means going beyond final outcomes to evaluating how they were achieved. We must be accountable not only in terms of compliance to rules, but also in terms of acting according to our core values. There are many recent examples of corporate irresponsibility that were not caused by a failure of compliance with rules, but by a lack of observance of core (or any) values.
The World Bank Group recently moved away from a Code of Conduct (which overlapped with some of its internal staff rules) to a Code of Ethics structured around the five core values of impact, innovation, respect, teamwork, and integrity. The new Code of Ethics allows all stakeholders to hold each other accountable according to the values of the institution. This can be done, for instance, by using the values in determining performance evaluation, giving and receiving feedback based on whether the values have been upheld or ensuring that the terms of recruitment for the World Bank Group always incorporate the values as a key requisite for the recruitment panel to consider.
Accountability through monitoring and transparency
For stakeholders to better assess alignment with corporate responsibility principles, it is essential to foster transparency and provide regular reporting and monitoring on these key topics. Why is transparency so important? Because transparency is a necessary condition for trust.
One interesting example is how institutions handle internal misconduct. The lack of feedback and transparency about the process and outcomes of investigations into misconduct leads to mistrust in how the system works, and an apparent lack of accountability to reporters. This, in turn, leads to under-reporting of even serious reputational and operational risks for these institutions.
In 2019, the Ethics and Business Conduct Department of the World Bank Group decided to start publishing an anonymized list of misconduct cases that have been sanctioned each quarter on an intranet page available to all staff. This has generated a dramatic increase in trust in the system, and incidents that had been hidden for many years are now being reported and addressed, furthering a virtuous cycle of trust.
In 2019, the World Bank Group adopted its ambitious Action Plan for Preventing and Addressing Sexual Harassment. There is a large body of literature connecting the prevalence of sexual harassment in corporations with toxic environments that lead to decreased productivity and accountability. Based on an external review by three independent experts, the holistic Action Plan included over 70 initiatives to be implemented over three years, and more than 90% have been achieved within the first two years. Largely as a result of implementing and communicating about these initiatives, the World Bank Group’s last engagement survey showed major gains in staff perceptions of the organization’s commitment to fighting bullying and sexual harassment.
Accountability as part of ethical leadership
Senior management must be ready to back words with action, and that includes holding accountable those members of the institution that fail to align with the core values and policies. It also includes imposing higher standards on managers and senior leaders.
At the World Bank Group, we do so in essentially four ways: (i) defining in the Code of Ethics additional specific obligations for managers, such as creating a safe environment for staff; (ii) deploying a new senior leadership onboarding program including deep dive ethics training, which fosters a culture of safe speech both to encourage innovation and detect potential ethical risks early; (iii) imposing stricter transparency requirements on senior leaders regarding their financial interests and personal relationships; and (iv) reporting on ethical risks as part of operational risk assessment, thus integrating the review of ethical concerns in the regular activities of managers and senior leaders.
The need to create a different relationship among stakeholders, modeled on trust, is boosting the demand for accountability in institutions and corporations alike. In this context, ethics and compliance departments are poised to play a more proactive role through increased presence in the operations of the business and through more active participation in corporate responsibility committees, as well as reporting to the boards of directors. The ethical dimension of business will have an increased impact on how businesses and institutions are perceived by stakeholders.
About the Expert:
Jorge Dajani became the Chief Ethics Officer of the World Bank Group on June 15, 2018. Dajani brings to this role a deep knowledge of multilateral development banks, a proven track record in corporate strategy and development, and a reputation for effective stakeholder engagement. He has been widely recognized for his management skills and stewardship of policies and procedures within international financial institutions with a focus on strategy, ethics and governance.
Prior to this position, Mr. Dajani was Alternate Executive Director at the International Monetary Fund, a position he held since 2016. Previously, he served as Director General for Macroeconomic Analysis and International Finance at the Ministry of Economy of Spain. He has served on the Boards of Governors and Boards of Directors of several multilateral banks, including the World Bank, the Inter-American Development Bank, CAF-Development Bank of Latin America, and the African Development Bank. He was Spain’s chief negotiator for the establishment of the Asian Infrastructure Investment Bank and the Green Climate Fund. He has also been a member of the economic policy committees of the European Union and the Organization for Economic Co-operation and Development (OECD).
