New Era in ASEAN Responsible and Inclusive Business?

China's Coronavirus Vaccines are ASEAN Countries Ready to Trust Them

(Keynote address by Tan Sri Dr. Munir Majid, Chairman Asean Business Advisory
Council Malaysia and of CARI Asean Research and Advocacy, at the Asean
Responsible & Inclusive Business Forum, 10th December 2020)

The rhetorical question in the title of my address is predicated on the assumption the Covid-19 crisis has had the profound effect of improving human moral consciousness, and separately of there having been good foundation in our region of responsible and inclusive practices in the business and other spheres.

I am not too sanguine about both suppositions.

Starting with the latter, as you are aware, there are any number of documents and declarations, both at regional and global level, on responsible and inclusive business practices, such as the code ARAIBA (Asean Responsible and Inclusive Business Alliance) is promoting, based on various commitments, for example the UN’s Sustainable Development Goals (SDGs), the G20 Inclusive Business Framework, Asean’s own Human Rights Declaration, its CSR Guidelines on Labour, the Asean Consensus on the Protection and Promotion of the Rights of Migrant Workers. Most
recently in the Asean Comprehensive Recovery Framework (ACRF) adopted last month which had digital inclusiveness as one of its five broad strategies.

All lofty and commendable. But where are we today? Why is there the need to promote the code such as the one ARAIBA is embarked on, when there are already so many of these calls to good, responsible and inclusive practices? Clearly there has not been satisfactory progress and much more has to be done. Where might it be the best place to start?

We read in corporate governance literature about “tone from the top.” I’d like to take a step up today to talk a little about “rot at the head”, especially political rot, which is the fundamental and foundational weakness of all other responsible and inclusive practices in society.

The 1MDB scandal in Malaysia, for example, is the biggest and most shameful violation of trust in governance of a country in modern times. The billions of dollars of debts for non-existent investments which were funneled into accounts of the conspirators, have left a huge liability for future generations which was compounded by projects with inflated costs and terms to generate payments to service those debts through a conduit of money laundering, sinking the country further into the abyss.

The appalling story is not over yet. There is the possibility of political deals intervening
against legal lability. In other words, interference against application and sanctity of the law, something not absent in other Asean countries.

I bring this up because of the huge negative demonstration effect violation of the sanctity of the law has, and will have, not just on other political leaders, but also corporate leaders who might deem themselves, because of a cozy link with the politicians, too big to fall – just like the corporate leaders of financial institutions on Wall Street and the City in London were allowed to escape their trespasses in 2008 with both bank and compensation intact.

When there is always the prospect of a “Get out of Jail Free” card if you are well connected, statute or no statute, there is unlikely to be a robust regime of observance of laws or codes.

This nexus, even if difficult to break in high politics and finance, should not ideally be allowed to worm its way into laws and practices pertaining to responsible and inclusive business. Unfortunately it has. The temptation is too great. Bad habits when you are able to get away with it, and where the benefit is considerable and divisible, become attractive.

Let’s face it. The task before us is formidable. But not impossible. It is good, even against the odds, to contribute to society. It is good for fellow men to be treated with decency to bring out of him the productivity whose profit can be shared even if not equally. Nevertheless bear in mind the “self-evident truth” in the US Declaration of Independence on 4th July 1776, “that all men are created equal”, has taken some years to be forged, and continues to be fought for.

You might say, surely these high level reflections are over the top when our concern here this morning is the more mundane matter of responsible and inclusive business. However, you must agree with me that fundamentally we have to get the governance right, from top to bottom, from head to body to tail. There must be transparency and accountability. There must most of all be the rule of law. It becomes a real challenge when political systems recognize it only in name but not in practice.

It is something else again when we talk of codes – such as the one ARAIBA is
promoting – which do not bind. There are even deeper issues to be discussed. What are the roots of our society. The social contract. I do not want to go into Hobbes, Locke or Rousseau, who first theorized about the best way to establish a human community in the face of problems of commercial society. Suffice to say, the values of a society and recognition of the common good, are defining. During this pandemic, some countries and societies have stood out well, some not, which has not a little to do with
value systems, discipline and holding together. For laws, regulations and codes to work, there has to be an underlying ethos of a particular society not marred by corrupt politicians and their ilk.

The plight of the 300 million or so migrant workers who in the last 30 years helped build modern China, relating to issues such as pensions and insurance, got the attention of the Central Committee of the Chinese Communist Party even if it is by no means all addressed. Many, including those employed by foreign firms, head back to retirement in the countryside where they do not enjoy the same social protections as the urban Chinese with permanent residence permits in the cities. The recognition is a good basis for action but, in the end, the action must be completed.

The Gulf migrant workers are left out of the social contract in the societies there. A powerful commentary observed: “When their workday is done, many are homed into spartan dormitories by their employers. Whether visiting workers have lived in the Gulf for two months or two decades, they are deemed to be temporary…” Most citizens treat them as a subservient underclass. Sadly, the COVID-19 pandemic revealed more bigotry than benevolence.

Sounds familiar? Do not forget your migrant worker is my national, my citizen. The number of migrant workers in Asean is about 10 million. The way one country uses, and treats, another’s citizen, is a constant irritant, not to mention violation of the rights of the workers. Although not mainly from Asean, in Singapore and Malaysia abominable housing conditions of migrant workers were exposed during the current Covid-19 crisis – which would not have come out into the open had it not been for the pandemic. There was no place to hide as the virus spread across the community with
no differentiation between national and non-national.

Laws were violated. But more than that, how could businesses be so unconscionable especially when windfall profits were reaped from sales, in Malaysia for instance, of protective gloves against the virus which was then allowed to inflict the very workers who produced them. Would the lesson have been drawn from this unprecedented pandemic which would inculcate more responsible and inclusive business practices?

This brings us to the question I raised at the start whether the COVID-19 crisis has brought about positive change in moral consciousness such that a good new normal has been established, at least in business practices.

Changing after being found out is not a good example of being reformed. Being quick to protect the vulnerable when others are looking raises the question: what about when others are not looking?

From the time of the rush for toilet paper at the start of the pandemic lockdowns to physical distancing becoming social distancing, the wrongly-used term, to disdain for individuals, areas and countries which may have been overwhelmed by the disease, it is still unclear if common suffering from the crisis has resulted in a new human bondage – which would further be tested as the lines form for available vaccines.

Leaving aside individual and societal behavior, improvement in corporate behavior cannot be left to chance. The cozy relationship between governments and employers has to be disintermediated by laws and regulations. And where laws are not applied, or are not applicable, by civil society and by the effort of good people and companies as are involved in this Forum to engender responsible and inclusive business practices.

The Swedish experience of consensus-building, respecting every voice, inviting everyone around the table, should be an inspiration as we in Asean seek to have companies build and grow around society. Their companies such as Ericsson, ABB, Scania and AstraZeneca AB are great success stories, not only of profitability but also of outstanding responsible business conduct, such as in sustainability leadership.

Indeed our very own relative success of holding together against the biggest challenge of our lives should be the foundation of working afterwards in a positive direction.

After the gale of creative destruction (to borrow from Schumpeter), we are still picking up the pieces and are not quite at a new normal which has been prematurely pronounced. Now is the time to think hard about what is the role ultimately of this unit of organization in society – the association of owners of capital and the providers of labour (human capital) in a commercial business we call the company, or the firm.

That part, how they are fulfilling their role in society, composed of workers who contribute to revenue and corporate well-being, has to be made a reporting requirement in the annual reports of companies. There should not be just the gloss of migration from shareholder to stakeholder responsibility. There should be more rigorous requirement on sustainability reporting, as there should be more detailed reporting on how employees are performing and treated. Both should not merely be covered in general going through the motions qualitative statements.

It would be a great statement for the 2021 financial year, would it not, if corporations above a certain size were to announce their employees have been vaccinated against Covid-19 at the company’s cost. After all, vaccine producing companies, such as AstraZeneca, have announced they are offering them at cost with no profit margin.
Vaccine availability should not be left entirely to the government in the spirit of employee-care and of contribution to reviving the economy after the most challenging time in living memory.

As countries come out of the crisis, all the talk is about digitalization, or tech-celeration, as it has been dubbed. The pandemic accelerated the pace of digitalizing a lot of everyday life, much of business and government operations. There are inevitably issues of responsible and inclusive business responsibilities that have to be addressed. The “All-in For Digital Transformation” clarion call of this Forum must have this subtext to it.

A few things to note as we prepare for in this Brave New World. We have to make Build Back Better real rather than just nice-sounding alliteration. Businesses have a responsibility towards sustainable development which they could work towards, for example, in terms of immediate healthcare, like Doctor on Call, telemedicine, epharmacy, but also in relation to infrastructure as in good sanitation and clean water.

The convergence of digitalization and healthcare and SDGs (Sustainable
Development Goals) is well enunciated in “A Pathway Towards Recovery and Hope for Asean” (Pathway 225) a set of 225 actionable steps that should be taken to have Asean Build Back Better, which was prepared by the Asean Business Advisory Council together with Joint Business Councils the world over and CARI. Enhancing health systems and strengthening human security are two of the five broad strategies in the ACRF. Both documents face the daunting task however of implementation which has always blighted Asean regional initiatives, including in responsible and inclusive

Pathway 225 and the ACRF underline the need for sustainable development, the green economy and green finance while not forgetting employee safety nets and ensuring inclusive digital transformation. The last is very important so that Asean workers, economies and countries are not left behind. It must be part of responsible and inclusive business practice that companies take on the task of reskilling and up skilling their workers. Employment displacement is a serious risk to social and political stability although it is not all bleak in the digital transformation process on that score. Companies invested in advanced technologies such as Amazon went on a hiring spree of 175,000 new employees since the lockdowns began in March as did Netflix that continued to hire throughout the pandemic.

It will be a mixed employment picture. A lot depends on what companies invest in, including how they use existing and bring in new members of staff.

There are two particular matters which I would like to bring up that have not been sufficiently discussed in Asean in the context of the digital revolution which have a bearing on conduct of business.

First, there will be a rise in gig-work platforms, a kind of out-sourcing model whereby the workers are not on the firm’s payroll. We should in Asean anticipate this and lookin detail into the rights and privileges of such workers who otherwise will enjoy no social benefits whatsoever. There is a need therefore to have some kind of statute of
rights for such workers, perhaps as addendum to existing employment laws.

Second, the history of technological change in the advanced countries shows the falling away of workers unions following greater sophistication in the production process. With more readily available data and clearer KPIs there have been more transparent measures of performance and fewer work disputes. There should be a code of management discipline on this in Asean to protect workers’ rights and to ensure fair treatment.

From the standards of national governance to responsible and inclusive business practices to individual decency, there is a long way to go in Asean towards which those committed to make grand declarations a reality have to dedicate themselves. Laws and codes will help, but the real test is in enforcement, adherence and, not least, inculcation of sound societal values.

Companies in the region should support efforts such as that by ARAIBA and must come out to play a greater role than they have done in lifting the standards of corporate governance and contribution to their workers and to the wider society. This has been done in countries such as Sweden without any loss of profits. Why not in Asean. We do not want to enrich just the few and to leave the majority behind. The polarization that will then come will cause serious fractures that could be destructive of integration at country and regional level.