Conference on compliance
On 22 November 2023, the Youth Business Stimulus Association, with the support of the BCCI, the Center for International Private Enterprises (CIPE), the Hungarian Economic Society, the Polish-Hungarian Chamber of Commerce and the Hungarian Business Leader Forum, organised a conference entitled “Opportunities to Raise Compliance Awareness in the V4 Countries”.
The conference started with a presentation by Jeffrey Lightfoot, CIPE Programme Director. As Lightfoot put it, CIPE’s mission is to support business leaders and entrepreneurs in actively engaging in social dialogues. This requires the development of a responsible business culture in which business leaders have the appropriate information and tools to contribute to the development of their environment through social responsibility. According to Lightfoot, while our region has a strong FDI attractiveness, there is a significant challenge in complying with international regulations and directives, which also represents an opportunity to be exploited to enhance competitiveness. Helping companies to take advantage of this opportunity – through the development of appropriate business incentives and regional dialogue to share best practices – is an interest of both the national economy and the region.
The next speaker, Ádám Balog – Vice President of BCCI – highlighted the participatory aspect of compliance. In his opinion, in order for Hungarian companies to become an integral part of international value chains, it is necessary to understand the different regulations, to approach them critically and to participate in their joint development. Through this process, regulations can be internalised, which can significantly increase companies’ commitment to compliance. Rules that are not external pressures and expectations, but internal imperatives, become automatic and habitual, a shift that is necessary for a healthy, responsible business culture.
This was followed by a presentation by Ferenc Bíró,President of the Integrity Authority. Bíró spoke about the era of the values crisis, a historical phase in which the common redefinition of universal values and their unified interpretation is a complex problem, thus traditional methods are not sufficient for solving it. Transparent legislation, a shift away from ‘business as usual’, underpinning value judgements and leading by example are all necessary conditions for changing the overall business culture. The Integrity Authority aims to contribute to this process.
Alexander Ghazvinian then took a more practical approach to the compliance challenges facing by SMEs. In a practical and pragmatic way, Ghazvinian stressed that compliance is primarily about reducing companies’ exposure to the law, and that the key for SMEs is to implement an imperfect compliance system and then gradually improve it, rather than going through the lengthy and complex process of building what is perceived to be a perfect compliance system. Formulating and communicating principles that are understandable and transparent to all employees in a company can trigger the necessary changes in business operations, while developing perfect regulations can be too lengthy a process and shift the focus from what’s essential and important.
The first session of the conference ended with a round table discussion with Ádám Balog, Ferenc Bíró, Martin Jacko and József Péter Martin, moderated by András Bácsfalvi. The role of NGOs in fighting corruption and creating a responsible business environment was discussed. József Martin pointed out the crucial importance of undistorted market mechanisms and a democratic institutional environment as essential factors for a shift in business culture. He also highlighted the changing nature of corruption around the world, its increasing institutionalisation and systematisation, which is creating fundamental tensions between NGOs and governments, making cooperation difficult. Martin Jacko added that corruption has become a less important issue nt he political and social agenda, following issues such as climate change, inequalities, etc. Mr Balog pointed out that when it comes to cooperation between different actors, we should bear in mind that national economies can be built only on culture-specific core values, and that dialogue should focus on the common development of these specific values, rather than simply importing external rules. The BCCI wants to contribute to such a dialogue.
The potential of the ESG approach was also discussed, with participants expressing a rather sceptical view. According to József Martin, while ESG can help to build internal integrity and thus spread good practices, it is not an effective tool to address the potential for corruption in inter-company and company-state interactions. Martin Jacko stressed the need for global political commitment, while Ferenc Bíró considers a fundamental change in financial incentives and the business operating environment to be essential, which the ESG framework does not necessarily cover.
The second session of the conference opened with a presentation by Tomasz Németh. The speaker highlighted that implementing and following compliance practices can enhance the predictability of the business environment and thus attract investors. Németh described how Poland has made progress in creating an attractive investment environment through, among other things, infrastructure development, and the development of the education and healthcare systems. He also highlighted progress in gender equality and the importance of public commitment to the EU. He also stressed the importance of strong Polish brands and self-made Polish entrepreneurial figures, which are important factors in the perception of the quality of the overall business and entrepreneurial environment.
Martin Sasinek then emphasized the importance of educating and training the new generation of managers by presenting the activities of the Slovak Compliance Circle. In his opinion, there is a significant potential for a younger generation of entrepreneurs in the region, socialised in a different social and political context. This new generation could approach compliance procedures and corporate governance more openly and consciously. He also stressed the crucial role of SMEs and local businesses in shaping the overall business environment of a country.
Filip Hloušek highlighted the competitiveness aspect of compliance and ethical standards. He argued that megatrends such as climate change and the resulting increase in sustainability concerns are fundamentally shaping the business environment, and ignoring them will lead to a loss of competitiveness and ultimately operational viability. In contrast, adapting quickly to these trends can significantly increase the competitiveness of companies. Integrating sustainability into business operations is, in his view, a moral imperative, a condition for survival and a way to improve business performance at the same time. The potential of SMEs in this area is significant, as their strong embeddedness in their local environment implies a more tangible obligation to take responsibility.
Afterwards, Ekaterina Lysova, Director of CIPE, as the final speaker of the conference, reflected on the presentations made earlier. She stressed the fundamental importance of developing a dialogue on the problem of compliance and business culture in general, and that the integration of the different approaches – philosophical, ethical, legal, political, economic – that the speakers had touched upon is essential to solve the problems. She particularly highlighted the value of the conference in initiating a regional dialogue on this issue. She also sees a need to create positive incentives for compliance as opposed to punishment, to create a business environment that rewards morally sound business decisions.
The conference ended with a second round table discussion moderated by László Trautmann, with the participants of the second session. In the first part of the discussion, the morality of companies was analysed from a historical perspective, as the concept of previous accumulation of capital – coined by Smith, then used by Marx – was often mentioned in the region during the regime change. The basis of this concept was described by the round table participants with a quote from Bernard Mandeville: „So Vice is beneficial found, when it’s by Justice lopt and bound”. Is this still valid, or has this approach been outdated by today’s entrepreneurs? According to the panellists, some kind of change is perceptible, a need among entrepreneurs to make morally sound decisions is getting more and more prevalent. However, the problem is not only one of commitment to a set of values, but also of finding the right support to make the right decisions. There is a need for organisations and associations to help find the morally correct solution to a business dilemma. Who should lead this process: the state, universities, business organisations or churches? Who has a decisive role to play now, it was asked. All of them, the panellists stressed, as these organisations share the common goal of creating a morally sound state. Participants agreed that defining the values on which responsible business practices can be built is a shared responsibility of society as a whole. A well-functioning democratic institutional system is needed to enable this social dialogue and to define the roles of the different institutions.
However, bodies (chambers of commerce, business organisations), universities and churches have a particularly important role to play in leading the way in this area and helping companies to acquire the knowledge they need to make the right decisions.. Finally, the role of chambers of commerce was discussed, and the panellists agreed that the outreach role of chambers of commerce is something that is very much needed in the current global economic situation. This means not only strengthening the legislative background, but also demonstrating the legislator’s intentions and contributing to informing about international and short, medium and long-term economic policy trends.