Badr Jafar is the Chief Executive of Crescent Enterprises, a diversified conglomerate based out of the UAE, and is the Founder of the Pearl Initiative, a non-profit initiative working to create a corporate culture of transparency and transparency in the Gulf Region of the Middle East. You can follow him on Twitter @BadrJafar.
- What is the most important ethical lesson you have learned (either personally or professionally)?
I’d like to look at ethics through a corporate governance lens: in my region of the world, family businesses are extremely important however are also extremely at risk. What dawned on me was that 85% of non-oil GDP was generated by family businesses in the Arab world and over two-thirds are now in the second generation: more than USD1 trillion will pass from one generation to the next in the Arab world over the next 10 years with the vast majority from second to third generation. This shift from siblings’ consortiums to cousins’ consortiums can in many cases lead to destruction of the business as well as the family, and this happens largely because these transfers are happening outside the framework of proper corporate governance. In addition, the importance of creating jobs for young people to handle the huge youth bulge in our region added to this destruction of value creates a double threat to our economies.
Some of these family businesses are so important to the economy of the country that in some cases the rulers of countries have had to get personally involved. There have been many major cases in the last decade or so across the Gulf region. In Saudi Arabia, a recently published figure suggested approximately 70% of family businesses have at least one dispute in family court, and the courts simply cannot hear all the cases. This issue is “upon us” not one for the future, and this inspired me to focus a lot on corporate governance/ethics within family businesses and to think about developing a platform, the Pearl Initiative, for sharing these lessons more broadly. So family ethics and business ethics are linked.
- What is the most shocking corporate ethics matter you have seen in the news recently? Non-profit sector? Why?
I wouldn’t necessarily start with the business cases. There is a fundamental problem with the definition of business success, especially when it comes to the metrics for success that encourages bad practice (e.g. pressure on boards to achieve quarterly results). So I’m not as surprised by failure within business ethics.
It’s the lapses within personal ethics, which I find more surprising, especially by elected individuals who have been given the trust of their communities. An example is the Mayor of Toronto; such serious lapses of ethics and integrity and over a long period of time not a single error. And these lapses in ethics are still happening in spite of increased emphasis on social media to promote transparency.
Finally, I don’t see remorse for these lapses, not like we saw, for example, with certain Japanese CEOs who expressed huge remorse and acknowledged their mistakes (under whatever pressure – customer or shareholder perhaps). This doesn’t make the underlying unethical behavior ok, but at least it shows awareness.
To be honest, I see a changing notion of leadership. Previously, political leaders (especially elected officials) were revered as the gold standard. Now with increasing media, especially social media, leaders have become human; too human. People then switched to trusting celebrity as a powerful form of leadership, and now increasingly there is a shift to peer to peer leadership. As a result, we have a form of democratization of leadership, and anyone can be a leader.
- What do you see as the opportunities for the corporate sector and non-profit sector to collaborate in raising the bar in ethical matters?
Opportunities must be regionally relevant and culturally sensitive. In the Gulf region today (particularly the United Arab Emirates), we have fantastic role models amongst government leaders and the royal family for ethics, integrity, and level playing fields. We even have leading women in both the public and private sector, in some cases more progressively than many European nations.
Our biggest opportunity is to translate this government-level modelling into the business community – to get heads of business to see that they need to be proactive and that they don’t have the luxury of waiting for regulation. They need to see that when businesses adopt value creation models, standards are lifted and business is more attractive to all stakeholders. It’s a win-win for all involved.
- What are the most effective strategies for mitigating risk of unethical behaviour in your organization?
We need risk mitigation solutions that work for SMEs – ones that small businesses can afford and that make business sense for them. We cannot apply a cookie cutter approach; we have to think out of the box. In a relationship-based society like the Gulf region, positive reinforcement works better than naming and shaming. Risk mitigation must be culturally sensitive. For example, corruption can be an uncomfortable topic that is difficult to talk about. Many would not voluntarily participate in a meeting about “corruption”. On the other hand, if we flip it and focus on positive reinforcement, solutions emerge.
The Pearl Initiative identifies corruption as a problem, but regionally relevant and culturally sensitive discourse leads to a positive approach of reinforcing those taking a stand against corruption and engaging in efforts to combat it. I recently had the idea of incorporating “trumpet blowing” vs “whistle blowing” – praise for positive ethical behavior. This would complement rather than replace some of the core protective mechanisms. We still need mechanisms such as whistle blowers (we even use one that is London-based).
- What are your strategies for ensuring ethical policies and standards flow down through all levels of the organizing and to all stakeholders?
Pearl Initiative covers the entire value chain. We have developed networks. While we never favor some companies over others in terms of partnerships with them, some major companies came on board during our infancy and brought along their suppliers and service providers. We have to be careful to keep in mind the importance of size of companies: we cannot apply the same requirements to a small entrepreneurial company as to a seasoned company, such as Unilever. In addition, we should not just exclude stakeholders for failing to comply. They may tell you about problems, but the result will be box-ticking. Some will not disclose problems. We should develop incentive models to demonstrate how they do good, putting the onus on them, and through transparency select favorite suppliers that reward this.
Businesses must find solutions. Big businesses with multiple suppliers should be able to find solutions if they are good at their business.
- Are there areas you think regulation should be more extensive in regulating corporate ethics? Non-profit sector ethics?
I see relying on regulation as a last resort, the lowest common denominator. The true long-term business value creation looks at ethics and best practice. You can’t simply rely on the basic law. There are certain circumstances when regulation is important, for example where there are wider geopolitical issues at stake. But I do not favor regulation as a solution in general. An example would be premature quotas for issues such as a lack of women on boards. It creates risk of appointing women before a community of business women has been properly nurtured as board directors.
- Should culture be an important contextual element in ethics analysis? What is unique about the ethical culture and environment in your country that should be taken into consideration?
With respect to the Gulf region, there are critical differences that have socio-political and socio-economic impact and influence perspectives on both. First, we have a youth bulge with 80% of the population under the age of 27. This is only going to increase. We need to generate significant employment opportunities if only to keep the unemployment rates from rising. Currently average youth unemployment in the region stands at more than 40% (more than 50% if you look at women). Second, family businesses have huge impact on the economies of the countries in the region. Third, the hierarchical systems play a role. Patriarchs and matriarchs command respect, but combined with the positive aspects of this culture of respect there is a need to develop leadership skills within the youth. Sometimes by the time the authority is handed down to them they have never actually made a decision.
More generally, every culture has advantages and complexities, and we need to work with both. The question “does the ethics system work” requires ensuring that (a) it resonates with local culture and (b) will be adopted by local culture.
Finally, we saw what happens when culture is misinterpreted or ignored in some Middle Eastern countries where a campaign for democracy took place without appreciating the local dynamics, particularly weaknesses in institutions and in rule of law.
- Do you think globally applicable ethics principles and practices are possible? Desirable?
There are certain things that are universal truths, for example matters relating to children. But even within seemingly very clear examples such as child labor, it is important not to take a cookie cutter approach or people will go underground. Some communities may find it extremely difficult – in some parts of Africa, for example, children under the age of 16 may work with their families in the fields at dawn and then perhaps go to school later in the morning – attacking those communities as extorting their children without understanding the socio-economic dynamics and culture can be dangerous. The ‘global community’ can sometimes be very quick to criticize without thinking through the community-wide picture and the real ethics of the situation within the specific context.
- What is the biggest mistake people make in making decisions around ethical issues?
The biggest mistake is taking a cookie cutter approach to ethics as mentioned previously. This is very dangerous because it alienates people. At a minimum they disengage and you lose them permanently from the conversation. At Pearl Initiative, a critical part of our approach is to ensure that we develop culturally sensitive and locally-relevant solutions, and this is easier for us to do since we are a home-grown for-business, by-business initiative.
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