Central and Eastern Europe: Ukraine – Ethics stuck in the middle

[V-G]

Ethical Corporation: Special Reports - Central and Eastern Europe: Ukraine √ Ethics stuck in the middle

Special Reports:
Central and Eastern Europe: Ukraine – Ethics stuck in the middle
Where responsible business is concerned, Ukraine is caught between looking to Russia and to the west

Ukrainian firms historically look to Russia for ideas. But the appearances of multi-national firms, often with US or EU presence, means western ideas about responsible business are now being propagated in Ukraine.

The arrival a couple of years ago of the UN Global Compact has also been a catalyst for progress, and corporate profits may keep flowing, at least in the short term, to fund such interest in responsible business. Ukraine’s economy grew 7 per cent in 2007 and the largely domestic-funded financial boom looks set to continue.

Corruption, however, remains a barrier to efficient business progress. Other obstacles include skills shortages, badly planned tax regimes and outdated regulation. The country’s media may be increasingly vibrant, especially compared with Russia’s, but as elsewhere in central and eastern Europe, independent local non-governmental organisations are few and far between.

Political intervention is the area of biggest difference between Russia and Ukraine on responsible business. In 2003 Russian president Vladimir Putin told Russian companies that their licence to operate would depend on staying out of politics and getting involved in tackling important social issues. This has led in part to the recent increase in Russian corporate social reporting.

Ukraine’s political chaos has meant little pressure from the government on social responsibility. Hence a different, more voluntary, western ethical business ethos has begun to take hold.

Signs of action

Intel, the chip-maker, is applauded by many Ukrainian responsibility-watchers. The company, which wins awards worldwide for its ethics practices, has a partnership with the UN Development Programme to use technology to educate both youth leaders and teachers about managing social projects.

Another firm known as a leader in Ukraine’s limited field is TetraPak, the Swedish packaging giant, for its work in encouraging recycling. Other firms that are highlighted by Ukraine experts as undertaking varying degrees of what might be termed corporate responsibility include Coca-Cola, Microsoft, oil firm TNK-BP, mobile operators KyivStar and MTS, and cosmetics group Avon.

Aids is a big issue in Ukraine – UNAids estimates that 410,000 Ukrainians, or 1.4 per cent of adults aged 15 to 49, live with the virus. Interpipe, a Ukrainian steel tubes firm, has gained plaudits for its initiative on Aids awareness and education. Industrial Union of Donbass, another big heavy industry firm, is also taking a keen interest in tackling HIV. British American Tobacco recently produced its first report on the topic in the country.

The company that is mentioned most in corporate responsibility circles is System Capital Management. The company is the country’s largest, combining mining and power generation with new technology and finance. The firm is huge, owning more than 100 businesses with 160,000 employees. SCM was the first Ukrainian firm to report results using International Financial Reporting Standards.

SCM’s director of international and investor relations, Jock Mendoza-Wilson, says addressing basic health and safety issues ignored in Soviet times is a key area for Ukraine’s big domestic industrial firms. The company is currently working on its first social report, to be published later this year. Mendoza-Wilson describes the environment as an “emerging issue” in Ukraine.

The signs are, from these examples, that Ukrainian firms are beginning to understand their potential role in tackling social problems. For now, meeting basic standards of corporate governance and financial transparency, and understanding how responsible business links with core business, remain Ukraine’s biggest ethical business challenges.

[bm-21Lemko]

Interesting article, it seems many interesting changes have been made.

Good article

[V-G]

I've been saying this for years and slowly we are starting to hear it on the news. Ukrainians need to raise the bar with their ethical standards and the economy will boom. Corruption is the single biggest evil Ukraine has been facing since the collapse of the USSR.

[bm-21Lemko]

yes, that is true there are curropt ukrainians in high ranking positions.

But Ukrainian business men did donate much needed supplies, such as a computer and other things to the tallest man in the world, Leonid Stadnyk to help him medically.

So it just depends. There is good people out there and bad ones.

[V-G]

Originally Posted by Kathy

Interesting, but I note the ethics position is taken by foreign firms.

My husband has been talking about this a lot recently, because one of the founders of the Foxtrot group died in police custody in Kyiv recently, and my husband knew him well. I met him too.

My husband's comment was "The sleaziest, slimiest representatives of the communist party are now Ukraine's leading "businessmen" and politicians. They've stolen everything except the land, and now they are moving on to that. How can the average Ukrainian survive?"

Your husband sure has a way to put it, but this is how I see it too.

Even if it is only foreign firms that show ethical behaviour in Ukraine it is still good news. I know it won't spread as fast as one would want it to, but it is still a big step forward and we should appreciate it.

My father used to complain that as long as one had connections they could get any kind of idiot a great job in Ukraine. Things are changing, just because you are someone's cousin doesn't mean you can now have a job that will ruin the owner's business venture. Ukraine is moving forward and I think this type of article is simply showing that. Baby steps.

[V-G]

Kathy,

My father dealt with a very large number of "businessmen" in Ukraine. Seeing how his clients were making money allowed him to categorize them into three categories:
1. Bandits
2. Mafia
3. Businessmen (connected to mafia).

He always hated Bandits because it is their kind that would steal from orphanage and try to make money on just about anything. They have no respect for anything and think they are above the law (he never defended one, he would always ask them to choose another lawyer).

Such people will get what is coming to them. If they get caught and go to prison they are not the kind that will have a good life there. Mafia is different.

What I am trying to say is that although such news are very dramatic in nature this is the kind of problem that will be fixed. I can't say the same about corruption... it seems deeply embedded into the way of life.

I don't know your take on the issue, but I see Ukrainians as followers of the Western world. If they see foreign companies behave a certain way they may just follow the lead.

[Max_the_Highlander]

You guys are deadly wrong. The article is quite correct but it's written by normal people and pictures Ukrainian business rather objectively.

There are problems but the growth is obvious. Not all business people in Ukraine come from commies or mafia. It's ugly distoreted opinion, the Russian TV shows the things very similar way but it's ordered lie. Kathy and V-G, you are not business people, it's not your area. You are just salary people as maximum. May be you just don't see enough and can't spot the things in business World.

Many foreign "businessmen" come to Ukraine with aim to produce the child porno videos, to organize narco traffic, to create another MLM pyramid. There many such cases and they will be. Of course if let's say a criminal comes to Ukraine he sees everywhere "bandits & mafia" (what is the difference between them, btw?). That's because he exists in such environment and has not access to cleaner and higher places.

Everywhere there is criminality and there is business, sometimes they are connected, in Americas too. You just put things too simply. Obviously living in other part of globe you have not trustworthy information and you both are too lazy to find it even in Internet.

It's just case of you blindness and bias and the situation in Ukraine is much better. The EU is ready to give us the associated memebrship, the talks successfully continue and may this is also the sign that many Western countries trust the Ukraine.

They trust because they know. Ignaramuses of all kinds blame Ukraine because they are blind and don't use anything except the own shortcuts.