Let's Increase Financial Integrity Around the World!
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Rotary's Second Object calls for high ethical standards in business and professions. Learn how corruption and unethical business practices create extreme poverty. Be inspired to use the 2nd Object and the Four-Way Test to combat poverty. Help to develop practical tools to promote better ethics worldwide.
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Let's Increase Financial Integrity Around the World!
- 1. A PAGE FOR BIG BOLDBULLET ITEMS Let’s Increase Financial Integrity Around the World! 4 June
- 3. RI Convention 2019 4 SIMULTANEOUS INTERPRETATION Korean - TBD Japanese - TBD English - TBD
- 4. RI Convention 2019 5 Please rate this session in the Rotary Events app, available in your Apple or Android app store.
- 5. The Breakout Team RI Convention 2019 6 • Rotarian Corinne Gregory Sharpe • PDG Sergio Levy • PDG Richard Clarke • Rotaractor Joey Vaesen • PDG David Stocks
- 7. Purpose RI Convention 2019 8 To inspire Rotarians to take practical ACTIONS to achieve Rotary’s Second Object: • promote high ethical standards in business and professions; and • recognize the worth of all useful work
- 8. Are we achieving Our 2nd Object? Research leaders tell us we have more work to do: – Global Financial Integrity Program – Transparency International – Caux Round Table for Moral Capitalism – Global Organization of Parliamentarians Against Corruption RI Convention 2019 9
- 9. What would you do? RI Convention 2019 10
- 10. We had a flow of polio RI Convention 2019 11 Rotarians helped victims of polio.
- 11. We turned off the flow of polio! RI Convention 2019 12
- 12. A modern flow Economic migrants are flowing northward. RI Convention 2019 13
- 13. Can we turn off that flow? • Economic migrants are leaving their homelands • Many homelands are RICH! – Consider Africa • Why would anyone leave a rich homeland? RI Convention 2019 14
- 15. Three Financial Problems RI Convention 2019 16 • False transfer pricing –Lying about the value of imports and exports • Corruption –Stealing the birthright of citizens • Disrespect for low-level workers –Alive, but NOT thriving
- 16. The Tools of Economic Theft Secret ownership of bank accounts Secret ownership of private corporations Impenetrable networks of corporations “Shell” corporations Tax Havens RI Convention 2019 17
- 17. Ethical International Trade RI Convention 2019 18 Producer Customer Product Payment This is NOT how trade operates!
- 18. False Trading Records RI Convention 2019 19 Producer Customer Product Shell Corporation In Tax Haven The product is deemed to come from the tax haven. $BIG $small
- 19. False Financial Records RI Convention 2019 20 Producer Customer Product Perfectly legal but NOT: True, Fair, Beneficial to all $13 $100 Shell Corporation In Tax Haven Operations $40 $BIG $small
- 20. False Transfer Pricing of Imports RI Convention 2019 21 Perfectly legal but NOT: True, Fair, Beneficial to all Supplier Purchaser $100 Item $800 Shell Corporation In Tax Haven $700
- 21. The Role of Tax Havens Dr. Krishen Mehta on Tax Havens 75% of the profits of multinational companies are deemed to be earned in 4 Tax Havens: • Switzerland, Singapore, Bermuda, Cayman Islands Some “products” are intellectual property –Apple, Google, Starbucks, Facebook RI Convention 2019 22
- 22. Let’s End False Transfer Pricing RI Convention 2019 23 • $20 billion/year worldwide. • Companies should tell the Truth about revenue, expenses, and profits where they actually operate. – “country-by-country” accounting • Companies should pay Fair wages and taxes where they operate. • Business operations should be Beneficial to all concerned.
- 23. Corruption in governance RI Convention 2019 24 • Cash • Gifts • Padded supply contracts We need laws to make this thievery obvious.
- 24. Bad ethics in supply chains RI Convention 2019 25 Disrespect for low-level workers • Bananas, Tobacco, Cocoa, Garments, Mining • These people should thrive! Disrespect for higher-level workers • No promotions for 100 years?
- 26. 1. Political Action RI Convention 2019 27
- 27. 2. Shareholder Action RI Convention 2019 28
- 28. 3. Recognize good corporate ethics RI Convention 2019 29
- 29. 4. Reach out to youth RI Convention 2019 30
- 31. WHY? • Continued decline in ethics, integrity & moral behavior • Increase in Tech contributes to a decline in morality and ethics • Bad behavior, reality shows, violent games direct our “entertainment” • Our children and youth – our future – are negatively impacted by all these factors
- 32. Education is KEY to the CURE • 85% of your success depends on your social skills (Harvard, Carnegie Mellon, Stanford) • Many barriers to positive character development • Rotary has an opportunity to lead the cure for this epidemic
- 33. What can Rotary DO? Rotary Club & Individual support When asked “What is Rotary?” –Stress the Four-Way Test as our BELIEF and our PRACTICE
- 35. Provocative questions - 1 RI Convention 2019 36 Rotary is one of the most notable volunteer organizations worldwide. What more do we need to do to be more revered? Or to become an “object of desire"?
- 36. Provocative questions - 2 RI Convention 2019 37 Do we agree that the “compliance" now so fashionable in the business world is nothing more than The Four-Way Test summarized in one word? Do we agree that "Ethics" is the very essence of The Four-Way Test?
- 37. So… RI Convention 2019 38 • Why should The Four-Way Test be framed on office walls and recited at meetings? • Can Ethics become the "key word" to attract people while promoting Rotary's membership and public image? • Could the word Ethics be shown on the signs that indicate the presence of Rotary clubs in cities?
- 38. Rationale RI Convention 2019 39 Without Ethics (or another powerful word), Rotary seems - for much of the population - to be a gastronomic organization.
- 40. Rotary’s Pursuit of Peace – 100 years in the MakingHead Bullets
- 41. Financial Integrity & Ethical Behaviour is Key to Peace
- 42. CULTURE OF PEACE YAMOUSSOUKRO DECLARATION PEACE IS MORE THAN THE END OF ARMED CONFLICT. PEACE IS A MODE OF BEHAVIOUR. PEACE IS A DEEP- ROOTED COMMITMENT TO THE PRINCIPLES OF LIBERTY, JUSTICE, EQUALITY AND SOLIDARITY AMONG ALL HUMAN BEINGS.
- 44. Group Discussion
- 46. Action Planning
- 47. Please divide into small groups… RI Convention 2019 48 …based on: • Country • Zone • Language • ??? Use the flipcharts. Commit to ACTION!
- 48. RI Convention 2019 49 Please rate this session in the Rotary Events app, available in your Apple or Android app store.
- 49. THANK YOU!
Editor's Notes
- We have 90 precious minutes for the breakout. 30 minutes will be devoted to contributions from you – the participants in this breakout.
- If you require translation, please use the numbers shown on the slide.
- Rotary’s Events staff hopes that you will provide some feedback about this breakout.
- Please welcome the members of the breakout team…
- Let’s start by considering our second Object.
- We have had this Object for 97 years. We need to put more effort into achieving this Object.
- Leaders in business and government display appallingly low ethical standards. International businesses use False Transfer Pricing to create “illicit financial flows”. Government leaders accept bribes to allow access to resources . The work of people in developing countries is treated with contempt. Hundreds of clever people are conducting research and publishing reports BUT those organizations do not have the strength of Rotary. 1.2 million Rotarians in 35,000 Clubs can demand that this sort of thievery ends.
- Imagine that you walk into your kitchen and see this. What is the first action you would take? First, you would turn off the tap to stop the flow of water! Only then you would grab a handful of rags and sponges and start mopping up the floor. Unfortunately, a lot of Rotary work over the past century has been directed at mopping up floors – not turning off taps. EXCEPT FOR OUR WORK ON POLIO!
- We raised funds and did service projects to help polio victims: Iron Lungs wheelchairs Surgery Braces Etc. But that was like mopping the kitchen floor while the flow of water continued. We decided to Turn Off The flow of polio victims.
- Our main focus is to PREVENT the disease – not just to reduce the results. AND WE ARE DOING A GREAT JOB! We still raise funds and do service projects to help polio victims: wheelchairs Surgery Etc.
- flows of ECONOMIC migrants create numerous problems: Safety Housing Food Integration Walls to keep them out Rotarians can ACT to reduce suffering of migrants on their journeys and at their destinations. Would it not be better to Turn Off The Flow of ECONOMIC migrants?
- Africa has gorgeous landscapes, stunning beaches, enormous reserves of diamonds, oil, and copper as well as: 50 per cent of the world’s gold; 98 per cent of its chromium; 90 per cent of its cobalt; 64 per cent of its manganese; and 33 per cent of its uranium. However, most citizens of those countries do not have access to the wealth. (OXFAM, et al, publish “poverty porn”)
- We need to solve the problems that prevent the migrants from sharing in the wealth of their countries.
- I will describe the problems in clear, intemperate terms but the problems and solutions are complex. There will be strong resistance to change. Corrective action will take years of sustained effort. “Money” is just a notation in a computer. Computers and telecommunications have made it possible to move huge amounts of “money” around the world in an instant using false documentation. Some of the money is used for corrupt purposes. The worth of work at the beginning of supply chains is not recognised.
- Banking secrecy started about 100 years ago. Some good aspects but LOTS of bad aspects. Places where secret ownership of companies is legal Nevada, Delaware, South Dakota, Wyoming Obama’s issue re Seychelles. 114 islands. 94,000 people. One woman had 100 corporations in Wyoming. Networks of secret ownership. Impossible to “seize the assets” of anyone. Jurisdictions that do not need tax revenue
- You would think that international trade works as shown. Product is given to Customer. Customer pays Producer. Almost ZERO trade actually works that way!
- The producer pretends to sell the product to a shell corporation in a tax haven. This is a blatant lie. False paper trails are created. The shell corporation pretends to sell the product to the customer. Another lie. The shell corporation buys the product at a small price but sells it to the customer at a BIG price. Profits build up in the tax haven. If the trading company knows that something is false, but “deems” it to be true, then the trading company is lying!
- The financial numbers on this slide come from a study conducted by Dr. Krishen Mehta for Yale University. The Customer pays the shell corporation. 40% of the payment is used to operate the legitimate business. 13% flows to the producer. The producer does not make much taxable profit in the country where it actually operates. The remaining 47% of the payment disappears into the money cloud!
- This slide shows real numbers from an example told to me. This is a sneaky way to move money out of the purchaser’s country. That reduces taxable profits in the purchasing country.
- Corporations do not OPERATE in tax havens. Profits can be “booked” anywhere. We can’t “follow the money”. Google in Bermuda. Lady Margaret Hodge: the best comment ever made by any politician!: not illegal; immoral. Krishen Mehta completed his 30 year career with PricewaterhouseCoopers in 2008 having served in its New York, London and Tokyo offices. He is currently a Senior Advisor to the Tax Justice Network, and is on the Asia Advisory Council of Human Rights Watch. He has taught at a number of Universities, including the Fletcher School of Law and Diplomacy at Tufts University in Boston. He has been an invited speaker at the Global Justice Program at Yale University. Krishen also serves as a trustee of the Institute of Current World Affairs in Washington, DC, and is one of the founding directors of Asia Initiatives.
- Companies should declare income, expenses, and profits in the countries in which they actually operate. This is called “country-by-country “accounting.
- A mining company that has found a rich deposit of minerals in a particular country but does not want to pay all the royalties that are legally required. The minerals are part of the birthright of the citizens. The royalties are needed to fund the government. …to ensure reduced royalties for the minerals you extract, deposit $10 million to this secret bank account in the next few days. …my farm house is just not large enough and it does not have a swimming pool. …delays in your supply of imported steel and cement could cost you great penalties.
- All international firms need to be held responsible for the conditions of workers right back to the beginnings of their supply chains. Miners, farmers, garment workers, etc., are paid enough for them to survive, but not to thrive. No education for children No travel Unsafe conditions – e.g., Rana Plaza No career advancement for local citizens.
- Rotarians, we have work to do!
- We need laws to catch up to computers. Reduce banking secrecy. Eliminate secret ownership of corporations. Insist on country-by-country reporting of financial operations.
- Buy shares in a target corporation Ask politely about finances & supply chains Raise questions at shareholder meetings Go public, if necessary
- Establish a scheme for public recognition of good corporate ethics at the Club, District, and International levels. Perhaps, in years to come, corporations will strive to be recognized by Rotary for high ethical standards.
- Support the teaching of ethics in schools.
- Americans' ratings of U.S. moral values lowest in 7 years (Gallup Poll, May 2017) 81% say state of moral values is "only fair" or "poor" 77% say the state of moral values is getting worse Not just a US problem; a global social epidemic We practice as adults what we learn as children What are the adults modeling TODAY?
- What we see currently in education… Underachievement, discipline problems, bullying & school-based violence, high drop out rate, etc. Sacrificing character education for academic mandates Book provides a deep-dive into the character foundations of the 4WT, its significance, its implications Opportunity to use this as outreach to NON- and prospective Rotarians to explain the value and significance of the 4WT Use the 4WT as marketing for Rotarian ethical practices Bring this message to the world at large Change a student, change a school, change a COMMUNITY
- Share copies of the book Support speaking engagements Create ethics initiatives in your own Clubs Sponsor character initiatives in your local schools & businesses Donate books or sponsor SocialSmarts (or similar) in schools
- RI convention 2019
- For most of Rotary’s history, we have had the aspiration goal of Peace in the World. In 1921, Rotary adopted our 4th Objective : “THE ADVANCEMENT OF INTERNATIONAL UNDERSTANDING, GOODWILL AND PEACE THROUGH A WORLD OF FELLOWSHIP OF BUSINESS AND PROFESSIONAL PEOPLE UNITED IN THE IDEAL OF SERVICE” . With this declaration, Rotary joined the global effort to create a peaceful world.” In the century since, Rotarians have implemented many programs and undertaken thousands of projects designed to improve peoples’ lives, to do good in the world and advance peace. We have understood that we cannot hope to achieve a world of peace if fellow global citizens do not have safe housing, food security, potable water access to healthcare, a real opportunity to learn and participate in the economy.
- We Rotarians have taken steps to ensure that our efforts to assist others are impactful and that they are undertaken with utmost financial integrity. But - and this is a big but – our efforts can be undermined if beyond Rotary there is not financial integrity, if those with power are following practices that preclude, restrict or unfairly take advantage of our beneficiaries. Our efforts to give a hand-up can be thwarted by others. For example, we can help impoverished farmers improve their farming practices and productivity, but if they do not have access to a fair market – our efforts will fail.
- UNESCO, with which Rotary has a long history of collaboration, has recognized that Peace can only achieved by ensuring a more just, fair world for all. This is reflected in their push for creating a Culture of Peace – whereas the Yamoussoukro declaration notes – “Peace is a mode of Behaviour. Not just an absence of war”.
- I contend that Rotary can only achieve our 4th Objective – if we achieve our Second objective - High ethical standards in business and professions and adhere to the 4 Way Test in all we do. Sadly, corruption exists everywhere to one degree or another. I think that Rotarians around the world could make a huge difference in this world if we watched more closely for corrupt practices, for transgression of financial integrity and find effective ways to counter and end such practices. While there may be things Rotary can do as a Global organization, and there may be things our individual Rotary clubs can do, but there also things that Rotarians can do as individual citizens of their own communities, countries and as global citizens. Within our own businesses, non-profit and community engagement that decision- making is transparent, that proper stewardship of financial matters are always followed. We can support efforts to work with and support educators in their efforts to inform, educate and encourage the next generations to follow Rotary’s Second objective. Which is a strong foundation on which to build a Culture of Peace.
- It is time for you in the audience to shape our thinking.
- For this slide, Joey will type the questions and the gist of the answers.
- We hope you would like to plan some ACTIONS.
- Rotary’s Events staff hopes that you will provide some feedback about this breakout.
- Thank you for attending this breakout. We hope you are inspired to take ACTION to turn off the flow of economic migrants!