Remarks by Philip J. Dingle

Chairman & CEO

Esso Companies in Malaysia

Yang Berhormat Dato' Seri Mohamad Najib Tun Abdul Razak Menteri Pendidikan
Yang Berhormat Menteri-Menteri
Yang Amat Berhormat Menteri-Menteri Besar
Ahli-Ahli Yang Berhormat
Yang Berbahagia Ketua-Ketua Jabatan Kerajaan
Yang Berbahagia Tan Sri - Tan Sri
Dato'- Dato'
Tuan-tuan dan puan-puan yang saya hormati

Selamat pagi dan salam sejahtera

Dari mula lagi, ingin saya katakan, bahawa saya masih lagi, belajar Bahasa Malaysia. Walaupun kosa kata saya telah bertambah, saya masih lagi perlu baiki sebutan-sebutan saya. Saya diberitahu, saya masih lagi bercakap Bahasa Malaysia mengikut slang Mat Salleh.

Saya memang teringin memberi ucapan dalam Bahasa Malaysia. Tetapi, seperti pantun ini:

Bukan tak mau pergi ke desa,

Takut kena melintas paya;

Bukan tak mau bercakap bahasa,

Takut tuan tak faham slang saya.


As Chairman of Esso's affiliated companies in Malaysia, I am honoured, and indeed grateful, for the opportunity to address you today on a topic of considerable importance, both to industry and to government. Corruption can exact a toll, often in insidious ways, on all sectors of society, public or private. Let me applaud you for establishing this forum wherein open discussion may stimulate renewed efforts to eliminate corruption from our collective landscapes.

Esso has an historic, deep-rooted commitment to doing business in accordance with the highest standards of honesty and integrity. We are proud to operate in a country, such as Malaysia where such standards are welcomed, appreciated, and supported.

In bringing a business perspective to these discussions, I'd like to talk about four general areas today: First, a perspective on what constitutes corruption: Second, some of the more corrosive effects of corruption; Third, foreign investor considerations, including issues raised by the United States Foreign Corrupt Practices Act; and Fourth, to provide an example, and a brief discussion of Esso's efforts to prevent corruption.

What is corruption?

There is an old saying to the effect that, in order to conquer an enemy, you must know him first. Corruption can manifest itself in many forms, some less visible than others. For instance, last week, I noticed in the news, that the Penang Anti-Corruption Agency Director, revealed that certain groups had employed "custom and culture" tactics to confuse people into accepting bribes. These groups were using euphemisms like "donation", "gift", and "sincere contribution". So just what are we looking for when we battle corruption? Perhaps a look at its symptoms, or side effects, can help us identify this enemy.

First is Economic Harm

One common symptom of corruption's various forms is the economic harm caused to parties to an otherwise legitimate transaction. From a business perspective, we view corruption as a virus that, when introduced to a healthy business, can spread to weaken or destroy it from within. More specifically, we view corruption as the illicit, often covert, giving of something of value to an individual (or group of individuals) to influence them to act on the basis of the gift, rather than on the objective merits of the situation. When this happens, decisions and outcomes are distorted in favour of the gift giver or receiver, to the detriment of all parties.

An example of economic harm, can be seen in simple bribery, perhaps the quintessential form of corruption. A bribe - paying business suffers an economic harm or cost, at least equal to the value of the bribe, and, less obviously, the bribe - taking business suffers too. with added cost somewhere in the product. In the case where a request for a bribe is denied, the fact that one was demanded, can prevent a deal altogether. In either case, the result is loss of opportunity, efficiency, and profit for private parties, or in the case of government, in efficiency and loss of tax revenue. When uncovered, it also results in loss of reputation for all involved.

Is Corruption - Is An Avoidable Cost?

One complacent view, suggests that corruption is just another cost of doing business. That's the essential point, it is a cost. But it's an avoidable cost that, in today's environment, must be a target for elimination.. Intense, global competition demands maximum efficiency and effectiveness, including rigorous cost reduction efforts. Companies that fail to control their costs, will not remain competitive on the world stage. Countries that tolerate corruption lose tax revenues on lost profits, pass on to their citizens higher costs for goods and services, and ultimately stand to lose foreign investment to competing opportunities in other countries. As evidenced by efforts such as the Coral Initiative in the petroleum industry, cost reduction is an established business principle. Viewing corruption as an avoidable, rather than a fixed cost, warrants increased attention, as the monetary cost of corruption can be substantial.

And beyond this, the economic distortion caused by a corrupted transaction, can greatly exceed the monetary value of the bribe. Take, for instance, the bribe demanded by a procurement employee whose work includes selecting service contractors. Obviously, a service contractor loses the value of the bribe if he pays it. If he refuses to pay, he may lose the contract to a competitor. Thus, either way, the service contractor loses.

But what about the organisation whose employee demands the bribe? Has it really lost anything? I think the answer is a definite yes. The receiving company, or government agency, as the case may be, has first, incurred a higher cost for service, by at least the amount of the bribe. In addition, the corrupt employee may select an inferior service contractor, especially if better service contractors are unwilling to paying bribes. The result is that the receiving organisation has paid more for a needed service and receives inferior quality in return. 1 can assure you, that this is not the formula for success in today's competitive world, whether in the public or private sector.

To eliminate corruption, however, both sides in a transaction must co-operate. A service contractor's employee will be more likely to offer bribes, if his customer allows its employees to take bribes. Conversely, a receiving organisation’s employee will more likely demand bribes if the service contractor looks the other way when his employees pay bribes. Illegal Information Brokering"

Beyond simple bribes for favouritism, other, often more sophisticated, types of corruption exist. These significantly increase costs, for both industry and the economy. In the oil industry, for example, complex schemes to acquire insider information, part of a corrupt practice we have named "Illegal Information Brokering," are distorting the fabric of our construction and development


We all know that information can have economic value, and perhaps nowhere is that more true than in the bidding for and award of major construction or major machinery contracts. Payment for insider information takes many forms. In one common practice, a oil company employee who has access to sensitive information, such as bid amounts or bid evaluations, will be approached by a so-called "Illegal Information Broker." Using incentives which range from free travel, lavish gifts, or payments to concealed bank accounts, the broker seeks to obtain a wide range of information with competitive value. The broker then packages the information and sells it to one or all potential bidders and competitors.

In this situation, the company trying to acquire a service through what was designed to be competitive bidding, in fact winds up paying extra, not once but twice. The corrupted contractor must ultimately find a way to recoup, not only the cost of the bribe which the broker paid for the information, but also the broker's "commission".

This practice can involve sophisticated, tightly-organised networks and syndicates, and may include employees on long term, so called "retainers". These can be clerks to high-ranking executives. As with simple favouritism bribes, both the customer and supplier lose, but with illegal information brokering it is even worse. Costs are higher because of the widespread nature of the information gathering and because more than one supplier is buying the information, and also because of the introduction of a "middleman' and his fees into the equation. In addition, without the bid information being kept confidential, the competitive factor which drives down costs is lost.

Studies Show Corruption Imposes a Cost on Society

As you know, a number of international studies have been undertaken to rank the existence of corruption around the world. As with all studies, the data and analyses rely on certain assumptions which may be debated. However, in one such study, on the prevalence of corruption , foreign responders were asked to rank Asian countries. It found that countries with lower perceived levels of corruption tended to have stronger economies, not a surprising conclusion since the biggest loser in corruption is society in general. In this particular study, Malaysia's composite ranking was roughly at the average of all Asian countries, a finding, which directionally says there is opportunity for even stronger economic growth in Malaysia by continuing to deal strongly with corruption. Another study based upon world-wide data,, found an inverse relationship between the prosperity of the average individual citizen and corruption. This conclusion suggests that, world-wide, corruption costs have tended to disproportionately burden the populations of less prosperous countries, and is indeed, a significant factor in countries achieving economic well-being.

Corruption Imposes Societal Costs

Even more seriously, corruption can also have severe consequences for public health and welfare. Consider the possibilities if bribed foremen or inspectors accepts or ignore the delivery of substandard construction materials and thereby jeopardises the load-bearing integrity of a commercial high-rise building. Or, what about a bribed procurement agent who accepts faulty fire safety equipment to be installed in schools or hospitals?; or a corrupted waste haulier, might deliver hazardous waste to an improper dumping site, thus threatening public health and the environment by impairing water supplies; or a bribed mechanic who accepts counterfeit parts for public transportation, such as a bus or airplane, similarly increases the risk of catastrophic failure, and the resultant injuries or deaths of passengers and others. While I've chosen deliberately dramatic examples, this list is neither unrealistic nor exhaustive. Just as corruption takes many forms, so can its harmful results. Viewed in this context, one cannot afford to explain away corruption as "the way things are done" or "just another cost of doing business".

Foreign Investor Expectations The U. S. F.C.P.A.

I would now like to shift my remarks to briefly discuss corruption as it concerns foreign investors. As the Chairman of a U. S. based company, 1 must mention the United States Foreign Corrupt Practices Act, or "F.C.P.A." In brief, the F.C.P.A. prohibits U. S. companies and its employees, from making bribes, or offers or promises for bribes, to a foreign government official, government employee, or employee of a government-owned company. While debate continues in some quarters, outside the U. S. about the wisdom or propriety of such a law, for U. S. companies the F.C.P.A. is a reality which must be recognised. It can be a harsh reality, too, as companies may be fined up to the equivalent five million ringgit per violation, and individuals may be imprisoned up to five years per violation. Recently a large U. S. company was convicted and ultimately suffered more than sixty million ringgit in fines, the imprisonment of two of its senior executives, and an abundance of unfavourable publicity.

For Esso in Malaysia, compliance with the F.C.P.A. does not, in and of itself pose a problem, since our own business practices standards and relevant Malaysian laws have similar, and in some cases more stringent requirements. What does matter to us, from a competitive perspective are situations where F.C.P.A. or similar type restrictions, are not imposed upon others or are not enforced. For companies which have different business conduct standards, the absence of an F.C.P.A. type laws may leave bribery as an attractive risk, as an option for improving its business. What this means, is that in the short term, we as a U. S. company can be at a disadvantage with our competitors that do not have similar ethical standards and are not subject to the F.C.P.A. Up until last year, the United States is the only country to have criminalised the practice of foreign bribery by its citizens. 1 would predict that countries which adopt similar laws, will attract and sustain more investment from U. S. companies for the longer term, by creating a more, so-called "level playing, field", within and outside of their borders.

Multi-Lateral Efforts

Assisting both host countries and foreign investors, a number of multi-lateral, anti-corruption efforts are gaining momentum, mainly in the developed countries Prior efforts have resulted in the widespread elimination of tax deductions for illegal foreign bribes. More recent efforts are aimed at criminalising bribery. Organisations supporting such initiatives include the Organisation for Economic Co-operation and Development, the Organisation of American States, the United Nations, the International Chamber Of Commerce, and closer to home in Malaysia, the Better Business Bureau of Malaysia. This increase in both momentum and international attention, is a welcome trend which we hope will both continue and expand in scope.

Esso's Efforts To Prevent Corruption

What does a multinational U. S. based company like Esso, do to prevent corruption and corrupt practices by its employees.

Our basic ethics policy is quite simple: we will not tolerate an Esso employee's participation in corruption, or in fact any type of dishonest behaviour. Contravention of this policy will lead to termination of the employee, There is no acceptable excuse and no exemption for any level of employee. Esso's most prized asset is its reputation as an honest and ethical company, both as a supplier and a consumer. This reputation has developed, and is maintain through its ethics policy and its business conduct standards. The policy, and its standards are communicated to each employees each year, in writing, and each employees is required to sign a statement each year, which certifies their compliance with the policy, the standards and the guidelines. Management is then require to certify to our shareholders, on a annual bases the compliance by the organisation with the policy.

Deviations, even minor innocent ones are reported in writing. Included in this long-standing policy, is the strict observance of all local laws, but the policy does not stop there. Even where the law is permissive, we as an organisation have chosen to maintain the standards demanded by our policies and demanded by the strictest jurisdictions. Local customs, traditions, and mores, differ from place to place, and this must be recognised. But honesty is not subject to criticism in any culture. Shades of dishonesty invite demoralising and reprehensible judgements. We have found that a well grounded reputation for honest dealings, is in itself a priceless asset, that has served us well.

Employees in Esso, must also understand, that we do care not only in results, but also how those results are achieved. Employees are be encouraged to communicate to higher management, any situation that they feel might be questioned or misinterpreted, to record all transactions accurately in the books and records, and to be honest and forthcoming with the company's internal and external auditors. We expect and require employees to report suspected violations of the law or company policies, to higher management.

We also will to support, and we expect our employees to support, any employee who forgoes a perceived opportunity or advantage, which to achieve it, would have required sacrificing ethical standards.

These standards are simple, but are very difficult to implement and sustain throughout the world. However, in application, these standards work well, because there is little room for interpretation; Esso has tried to eliminate the "grey areas" for its employees. Generally, our employees appreciate the detail and rigor associated with the policy, because it makes clear what the expectations are, in what otherwise might be difficult situations. For example, we define a very nominal amount, that an employee can accept in the way of business entertainment or as a memento gift. The amounts are quite small, for instance the most cash that could be received for any reason, is 10 ringgit. Our contractors and the community are now aware, that our employees have no discretion to accept gifts, or any type of rewards, and as a result we now find very few instances where offers are now being made.

Efforts With Vendors/Contractors

Esso's efforts to discourage corruption does not end, with just its employees. Our agreements with our suppliers, vendors and contractors uniformly, contain provisions and clauses, which specifically address business ethics, conflict of interest, and compliance with laws, as well as audit rights to their books These audits are to confirm adherence to these provisions in the contract. We also regularly remind, our suppliers, vendors and contractors, in writing, of Esso's business ethics, conflict of interest, gift giving practices, and entertainment policies, in a brochure entitled "Doing Business With Esso." In addition, I personally write to every supplier each year, reminding them of these practices.

As a further preventative measure, at least annually, and before start-up of significant projects, we conduct business practice seminars for vendors, contractors, and selected subcontractors. These seminars focus on Esso's business conduct standards, as well as specific subjects such as illegal information brokering.

Some of these seminars take the form of structured courses; The illegal information brokering seminar, for example, focuses on specific details of violations and loss experience, both here in Malaysia and overseas, not only within Esso, but in the industry as well. It helps educate the participants about specific methods employed by the syndicated information brokers; and the countermeasures designed to prevent or detect illegal information brokering. Even in less rigorous vendor/contractor seminars, the main message is, that Esso will not tolerate improper approaches to our employees, or improper behaviour by our contractors. When appropriate, Esso exercises its audit rights to confirm compliance with its policies by vendors and contractors. As with non complying employees, termination of the contract is the consequence for violations of these standards. In addition, we will pass on information on illegal activity, and participate fully in criminal investigations undertaken by Law Enforcement Agencies.


Around the world we have worked hard to push for the highest levels of business ethics and integrity in our operations. I believe our efforts have succeeded for several reasons. First, our policies were carefully drafted, in simple language, to be clear and unambiguous; they need little or no interpretation. Second, we reaffirm our policies to employees, vendors, and contractors, on a regular and formal basis, both verbally and in writing. Third, our personnel are well trained to convey our policies and detect non-compliance. And fourth, lastly, we administer our policies with consistency, without favouritism, regardless of the offender's status or rank within Esso. In sum, we support our policies by dedicating substantial resources and striving for even-handed application.

1 would also say that despite practising such rigorous procedures, we have been able to operate, and operate competitively through out most parts of the world. In Malaysia, the laws, and the unique cultures found here, all support a high level of ethical behaviour in business and industry, As a result, our businesses in Malaysia have grown and prospered with the country, ... and we are one of the more successful affiliates within the Esso companies around the world.

It does however, take constant vigilance and effort to maintain high standards of practice. That is one reason why I think seminars such as this one today, are an important element, for maintaining and improving ethical behaviour.

In closing, I would like to again thank the organisers, for their courage and vision in selecting and addressing the important subject of corruption. It is through open discussion, that we can create the awareness and a sense of urgency to take on the task of dealing with, and ultimately defeating the corrosive aspects of corruption.

Thank you all for your kind attention.

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