‘Integrity over profits’
Last Aug. 29 we launched what will become the official society of the University of St. La Salle’s masters in business administration program. The society is called “Integritas,” and its message is grounded on the principle of “integrity over profits.” There is no more appropriate message, it seems, to be implanted in me and my fellow MBA students who are business owners, managers and future leaders in their respective industries, from education and accounting to banking and business process outsourcing.
It is fitting that in the face of the most obvious anomalies and irregularities marking our government and its agencies, integrity should come before self-interest, peso signs and the figures on the bottom line. Indeed, it is most demanded in institutions that are profit-generating. While we demand nothing less than transparency from the government, we must also, and rightfully, demand the same from private institutions and businesses, particularly those that serve as pillars of the economy.
That there are keen eyes on Malacañang and the officials that run it goes without saying. And in times when the dirtiest of scandals crowd the news headlines, everyone becomes a political expert or analyst, whether on an armchair in the living room, keeping an audience captive in the classroom, or holding forth on radio or television.
What is important to note, however, is that these keen eyes on the Palace linger there too long, such that there is hardly opportunity to pay attention to what is happening in board rooms, behind the doors of financial institutions, in the audit of the books and statements of corporate Philippines.
“Integrity over profits” is a call to the government for action. However, it must also be a battle cry directed at this country’s corporations and firms, which were primarily instituted for profit in the first place. Unfortunately, their impenetrable skyscrapers and intimidating numbers can keep many in the dark. But the aftermath of financial crimes that go unchecked is as clear as day—jobs lost, taxes unpaid, dreams foreclosed.
Last July, Toshiba’s chief executive and president, Hisao Tanaka, stepped down after it was discovered that he had overstated the company’s operating profits since 2008. The amount in question was a staggering $1.22 billion, thrice larger than the actual profits. This accounting scandal had been going on for an incredible length of time, and occurred within what is considered one of the strongest brands in one of the wealthiest countries in the world.
Looking back further, one will recall the global financial crisis of 2008. I was still in high school at the time, but it left an indelible mark on my mind. As the years wore on, the horrific aftermath of the crisis still manifests itself in the vulnerability of our financial institutions.
It has definitely changed the way this generation views its future. Suddenly, the dream of settling ourselves firmly on the corporate ladder is challenged because our corporations are not as indestructible as they once seemed. It may have delayed this generation’s aspiration to build a dream home, buy a dream car, or indeed start a dream family. The millennials are at front row center in reaping the debris of an almost cinematic financial crisis.
We seem to be at the mercy of institutions that have leveraged themselves to the point of impossibility. And with their financial wizardry they can conjure up something as insidious as collateralized debt obligations from their magic hats and display these to an awestruck crowd blinded by subprime mortgages and credit default swaps. All these happened right under our noses, orchestrated by wizards no less who take advantage of public ignorance of manipulated magic.
One need not look farther than India and the fraud in Satyam Computer Services Limited perpetrated by its then chair, Ramalinga Raju, who was found to have inflated the company’s assets, understated its liabilities, and consequently overstated its income. This was brought to light in 2009, only a year after the global fiasco of 2008. It caused massive losses among Satyam’s investors amounting to a mind-numbing $2.82 billion (Madan Lal Bhasin, 2013).
It’s alarming to imagine what an abandonment of integrity and falsified profits can bring to our own shores, should it happen here. Surely, corruption in government agencies can cripple the economy through misallocation of resources and crooked leadership. But creative accounting and information asymmetry can further drive the nails into the economic coffin. The United States certainly learned its lesson and now has its SOX (or the Sarbanes-Oxley Act of 2002, which is aimed at protecting shareholders and the general public from accounting errors and fraudulent practices in enterprises, as well as improve the accuracy of corporate disclosures).
Here in our backyard, does the government run the corporations, or is it the other way around?
The importance of a government initiative that will regulate publicly listed companies and highlight corporate governance cannot be overemphasized. We can learn from humanity’s long history with greed that heightened focus on and awareness of fraud can push the envelope for integrity amid the pressure for outstanding financial performance. There is no more appropriate time for Filipinos to be financially literate than now, when the economy is touted as a rising star and the real estate boom is suspected to be a bubble.
Integrity is a bright flame, and it should shine a light on not only public but most specially private institutions.
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