Corporate Governance, Ethics and

Culture in Outsourcing

Nasser Jamalkhan International Market Consultant,

EMEA

Biography

• Researcher & QA Consultant in Outsourcing

• Visiting Professor in IT/IS and Knowledge Management

• Professional Member and Certified Coach of the Intl Association of Outsourcing

Professionals(IAOP), USA

• Research Member of the SSHA Research Institute, Hertfordshire, UK

• Alumnus of the AABF (UNDP) ICT projects in Africa

• Member of the Institute of Business Ethics, UK

• Charter Member of the American Chamber of Commerce

What is Outsourcing?

It is the transfer of goods or service of usually a non-core operation to a third party under one of the following collaborations :

• Nearshore (Regional) Outsourcing:

– Sending work to regional locations

• Offshore (Global) Outsourcing:

– Sending work to overseas locations (Marshall and Cohan, 2003)

• Selective Outsourcing: – Outsourcing selected process or functions to vendors while retaining other

components or functions in-house. (Lacity et al., 1996)

Common outsourcing activities:

technology services outsourcing or ITO (electronic commerce (eCommerce), infrastructure (Networks), software (Applications), telecommunications and website development and hosting

business process outsourcing (Customer Contact, Customer Relations Management, equipment finance/accounting, human resources, logistics, procurement/supply chain management security)

Above can be offshore, onshore or nearshore; or even a mix.

Good corporate governance is not an end in itself. It is a means to support economic efficiency, sustainable growth and financial stability. It facilitates companies' access to capital for long-term investment and helps ensure that shareholders and other stakeholders who contribute to the success of the corporation are treated fairly (OECD, 2016).

Sustainable Corporate Governance

A company’s commitment to minimizing or eliminating any harmful effects and maximizing its long-run beneficial impact on society.

Mohr, Webb, and Harris Journal of Consumer Affairs (2001, 47)

Corporate Social Responsibility

Culture

• “A distinctive pattern of values and beliefs which are characteristic of a particular society or sub-group within that society.” Mullins

• “A set of beliefs or standards, shared by a group of people, which helps the individual decide what is, what can be, how to feel, what to do and how to go about doing it.” Goodenough

Ethics are the moral principles and values that govern actions and decisions with respect to what is right or wrong. Business ethics is the systematic study of how moral standards are applied to business decisions, behavior and institutions.

Ethics

9

An individual can participate at several different cultural levels

•National

•Sub-cultures

•Corporate

10

Schwartz, Salomm H (1997)

Conservatism/Autonomy

Hierachy//Egalitarianism

Mastery/ Harmony

Sustainable development

• Meeting the needs of the present generation without compromising the ability of future generations to meet their own needs.

• Holistic approach to the environment.

• Changes to management systems, company philosophy, marketing approaches.

• Aim to enhance the ‘triple bottom line’ – economic efficiency, environment, equity.

• Protect and restore ecological systems and well being.

Evolution of Outsourcing

– Common practice in the U.S. and industrialized nations

(McLellan and Marcolin, 1994; LaLonde, 2004)

– Scope and scale of outsourcing agreements have changed

The Evolution – 1960’s – Hardware: Service and Facility Management

– 1970’s – Software: Facility or Operations Management

– 1980’s – Hardware and Software Standardization: Customization Management

– 1990’s – Total Solution: Asset Management

– 2000’s – Application Service Providers (ASP) / BPO/KTO providers

(Lee et al., 2003)

Codes of Ethics

• Express the organisation’s values and culture

• Create guidelines for employees to work by

• Two main forms

– Integrity based codes

– Compliance based codes

The Corporate Response to Global Social

Issues

• Adoption of codes, standards and principles to meet the challenge of global social issues

• Corporate social responsibility is concerned with the impact of business on the societies within which it operates

• Corporate ethics is concerned with issues of individual decision making and the development of ethical conduct

Corporate Social Responsibility and

Competitive Advantage

• Corporate social responsibility as a source of competitive advantage – Reputation management

– Risk management

– Employee satisfaction

– Innovation and learning

– Access to capital, crowdfunders and business angels

– Improved financial performance

Primark case study

Source Primark (2016)http://businesscasestudies.co.uk/primark/engaging-with-stakeholders/

Corporate Governance in Outsourcing In regards to the quality standards in Outsourcing, Abbott et al (2007) suggest that Internal audit outsourcing offer significant potential for improvements in audit coverage and scope when provided by the external auditor. In the banking section, principles set by the European regulation appear to be designed to prevent that outsourcing translates into an ‘escape from responsibility’ (Lemma and Thorp, 2014); and then that competent authorities shall make further steps towards a proper configuration of supervisory practices on outsourcing. Most banks follow the global corporate governance principles and models based on the Organisation for Economic Co-operation and Development (OECD, 2004) principles of Corporate Governance. In 2012, the US Securities and Exchange Commission recognised the OECD Guidance as an international framework for due diligence measures and there has been an increase enforcement in the EMEA countries (OECD,2014) to address the desired corporate governance culture change.

KYOWA-EXEO CSR Model

Source : http://www.exeo.co.jp/overseas/info/csr.html

Take-Away Messages

• Codes of conduct – Normally compliance based – Sets out guidelines on key social issues – Forms basis for relationships with suppliers, contractors and licensees – Externally audited

• Statement of business principles – Essential corporate values – Company standards and practices – Understanding Cultures, Policies & Standards ISO37500, IAOP-OSB

• Value statement - (Don’t copy and paste, do adaptation)

– Integrity based – Emphasises individual responsibility for ethical conduct – 3C’s to remember Capability, Capacity and Competencies

Thank You

Nasser Jamalkhan COP FHEA FGMN Email: nj@opensd.co.uk

And see you on Thursday for an interactive workshop on Risk and QA