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Fixation with western business standards

/ 04:01 AM December 03, 2019

The business community in the Philippines should take a close look at western standards for corporate governance and fair competition to see if they are suited to local conditions.This was the gist of the speech of BDO Unibank president and chief executive officer Nestor Tan on the occasion of his acceptance of the award as 2019 Management Man of the Year of the Management Association of the Philippines.

He said “… universal prescriptions on governance may not apply to all markets. Worse, we may even get addicted to scorecards and awards [that are] mostly based on checklist against generic prescriptions.”

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Tan has expressed, without perhaps meaning to, the silent frustration of many business executives over the fixation by some regulatory offices with guidelines or standards on business governance observed in developed countries, in particular, the United States.In what appears to be a vestige of “colonial mentality,” these offices look to the United States as the epitome of responsible and effective corporate management whose rules and standards should also be adopted in the Philippines.

Its underlying assumption is, if they worked well in the United States, they should work well also in the Philippines.

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Citing the mantras “best global practices” or “internationally accepted standards,” some regulators require the submission of reports and performance of activities that mimic the actions of their US counterpart.Sometimes, they go overboard and become more popish than the Pope in the application of those rules and standards without taking into consideration the peculiarities of the local business community.

This results in companies incurring additional expenses in the preparation and submission of reports that are hardly read, or performance of acts that have minimal regulatory value, if at all. The affected companies have no choice but comply because, as the saying goes, “you cannot fight City Hall.” The regulators have life and death control over them. Seeking judicial relief would be an exercise in futility because of our snail paced judicial system.

The use of the mantras mentioned is questionable. Who decides that certain business rules and standards are the best in the world and should be followed by the businesses concerned? Any organization with an impressive sounding name and prestigious address can make that claim without having to show proof the practice has gained global recognition.

Internationally accepted? What is the criteria for saying a policy or procedure has earned worldwide acceptance? Just because it originated from or is practiced in the United States (or any developed country) does not entitle it to be described as such.The success of western standards on corporate governance in the United States or developed countries may be attributed to, among others, their advanced economic status, the political maturity of their citizens, the sense of responsibility of their leaders and the independence of their judicial system.

Given these conditions, those standards are, by and large, assured of scrupulous implementation and, in the process, accomplish the purposes for which they have been adopted.Unfortunately, the critical elements needed for the effective application of western standards on corporate governance are not present in the Philippines. Setting aside political correctness, we are a Third World country whose political and economic development leaves much to be desired.

It is wistful thinking that applying western rules and standards without making allowances for conditions peculiar to undeveloped economies would allow the Philippines to leapfrog to developed (or First World) status.

Indeed, it’s time to rethink or re-evaluate the applicability to the Philippines of rules and standards from elsewhere that are not attuned to our political, social and economic environment.

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TAGS: 2019 Management Man of the Year of the Management Association of the Philippines, BDO Unibank, Business
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