Press Releases
Remarks by U.S. Ambassador Richard E. Hoagland
The Value of Corporate Responsibility
The American Chamber of Commerce in Kazakhstan
Almaty, September 28, 2009
It is a pleasure to be with you here today, and an honor to address the members of the American Chamber of Commerce in Kazakhstan, of which I am proud to be Honorary Chairman.
You represent some of the world’s largest and most prominent corporations, including Chevron, ExxonMobil, ConocoPhillips, AES, General Electric, FedEx, and Merck. In 2008, almost 11 percent of total Foreign Direct Investment in Kazakhstan came from American companies. And over the past five years, U.S. exports to Kazakhstan have increased more than 300 percent.
You have spurred new technology, helped jump-start other companies, added thousands of jobs, paid taxes, and added to the bottom line of your companies. You have also had a major and lasting impact on the development and diversification of Kazakhstan’s economy, and I have thoroughly enjoyed working with many of you directly during my first year as U.S. Ambassador to Kazakhstan.
Recently, my friend Maksat Idenov, First Vice President of KazMunaiGas, shared a sentiment that gave me some insight into the government’s attitude toward foreign investors. He told me, “We want foreign investors to respect us, not just for our natural resources, but for our values.”
He said that U.S. companies have an outstanding reputation worldwide for upholding high standards of corporate behavior. And, he said he wished that – in addition to the technology, capital, and expertise you bring to Kazakhstan – American investors would also share their corporate values with their Kazakhstani partners. I know you already do this. That’s why I firmly believe that American business and American diplomacy are flip sides of the same coin.
Maksat is convinced that Kazakhstan’s companies can become world class competitors, but first, he believes they must become model corporate citizens. Because of his tireless advocacy of good business practices and corporate responsibility, I had the honor to recognize Mr. Idenov with the AmCham’s Ambassador’s Award for 2009 in July.
I am here today to reinforce that message, to applaud your accomplishments, and to acknowledge that a key reason for your success is the corporate culture and high standards of behavior that you uphold while doing business in Kazakhstan. This is what sets American companies apart. This is your true competitive advantage.
As you carry out your investment projects and develop long-term relationships with local suppliers, employees, and partners, I encourage you to continue your commitment to corporate responsibility. This is not another government mandate, but rather a business opportunity. It is a chance to set a standard that Kazakhstani companies will follow willingly, because it is the path to long-term success.
Whether in Kazakhstan, or in the United States, long-term success is based on a corporate culture of trust, integrity, accountability, and transparency. We teach these principles of corporate responsibility in our business schools and board rooms, just as you practice them in your projects, and with your partners.
I want to clarify one thing here: I am not speaking about corporate social responsibility, which I know is also integral to America’s business culture, and is an important aspect of your investment activities in Kazakhstan. I am not speaking about your valuable contributions to local schools, hospitals, and orphanages.
Instead, I am referring to good corporate behavior, and the responsibility that companies have to their shareholders, their employees, their government, and the host government of the country in which they operate. This is a responsibility to conduct business fairly and transparently, to communicate openly and honestly, and to deliver results consistently and sustainably.
There are many ways that U.S. companies help Kazakhstani partners to develop and practice a corporate culture of responsibility and accountability.
For example, annual corporate reports to shareholders and regulatory agencies help establish a practice of disclosure and accountability reporting that keeps stakeholders, including the government and the general public, informed about investment decisions, management challenges, financial returns, and project results.
I'm sure that your companies issue an annual report, but how many of those reports were written in Kazakhstan, together with your local staff? How many town hall meetings did you hold to shape and structure that report so that it captured the attitudes and opinions of local stakeholders? How much ownership do your Kazakhstani employees and partners have over the report? Does it speak for them? Does it fairly and accurately represent their values?
The Corporate Responsibility Report released by Tengizchevroil this year is an excellent example of this type of accountability reporting. I am told this report is the first of its kind published in Kazakhstan. I strongly recommend it to you and I hope that it sets a trend that other corporations in Kazakhstan will want to follow.
Good corporate governance is another element of corporate responsibility. It is critically important, for example, to have an independent board of directors, empowered and informed enough to provide operational oversight, strategic direction, and management accountability. The board should not be afraid to question and challenge senior corporate leaders, and even to overrule them when necessary.
KazMunaiGas Exploration and Production has made significant strides in the area of corporate governance, and now has three independent, non-executive Western directors, as well as a number of Western experts who advise the Board of Directors and the Audit Commission.
Corporate responsibility can also be developed through ethics training and standards. This is another area where U.S. companies have extensive knowledge and experience to share with their Kazakhstani staff and subcontractors.
For example, it is common practice for U.S. Companies to require all employees to pass an annual ethics course based on “gray area” scenarios that require good judgment to make ethically appropriate decisions. How many of you require your staff to pass an annual ethics exam, or provide training on ways to recognize and resolve conflicts of interest, or educate employees on the meaning and implications of the Foreign Corrupt Practices Act?
Another important aspect of corporate responsibility is increasing public trust. Local citizens, potential partners, and government officials must have confidence in the accuracy of your reports, the results of your projects, and the commitment of your leadership to long-term, sustainable development.
There are a number of ways to increase public trust. The most immediate step is to trust the public. Trust their desire to learn, to understand, and to become involved in the work your company does, and encourage them to do so. With your Kazakhstani partners and subcontractors in particular, show them the value of good corporate behavior. Demonstrate how corporate responsibility benefits the bottom line.
For example, many Kazakhstani companies have independently invested in International Standards Organization (ISO) certification in a number of areas, which has enabled them to compete for contracts and grants they would otherwise have been unable to pursue. ISO certification can instill confidence in a company, promote good business and governance practice, and improve risk management procedures.
The important thing to note is that these behaviors and practices must not be superficial or mandated from above. This is not about “checking the box” or appeasing the regulatory. Instilling the values of good corporate responsibility requires a commitment from within. This is an internal process of change, and must be self-motivated.
There are many ways that the U.S. Government and the U.S. Embassy can help promote a culture of good corporate responsibility. For example:
- We can deliver messages in private and in public, such as this one.
- We can sponsor training seminars and exchange programs.
- We can fund grants and technical assistance projects, such as those I signed on behalf of the U.S. Trade and Development Agency last week to bring the legal and physical infrastructure of Kazakhstan's maritime trade up to international standards.
- And we can make policy recommendations, such as those recently submitted to the government under the Public-Private Economic Partnership Initiative. The white papers on transparency and anti-corruption are particularly notable in this context.
None of these initiatives will increase production or enhance market share, and they will not cut costs. But they all add value to your bottom line. Responsible corporate behavior will increase the competitiveness and attractiveness of your company, so that others will want to work for you, invest in you, and partner with you.
U.S. companies in Kazakhstan already enjoy a well-deserved reputation for excellence, for quality, for safety, and for delivering results under even the most challenging circumstances.
I welcome your thoughts and suggestions on ways that I and my colleagues at the U.S. Embassy can help to develop a culture of corporate responsibility and encourage additional U.S. trade and investment in Kazakhstan.
I am proud of your record of success in Kazakhstan, and I wish you well as you plan future projects, strengthen relations with local partners, and expand operations in Kazakhstan.
Thank you all for your time and attention and for the inspiring example you have set. I wish you all continued success in Kazakhstan.
