J. N. N. Ng’ang’a – Meditations for the week of 8th - 14th October 2012 - Corporate Ethical Commitments – Part Two

J. N. N. Ng’ang’a – Meditations for the week of 8th - 14th October 2012 Corporate Ethical Commitments – Part Two Day 1 2 Thessalonians 2:13 [Stand Firm] But we ought always to thank God for you, brothers loved by the Lord, because from the beginning God chose you to be saved through the sanctifying work of the Spirit and through belief in the truth I hope, as we go on with this discussion, it is helping your worldview to change because the very purpose is not just to show you the issues we are discussing, but for you to start reviewing: why do I believe what I believe? Remember right at the beginning we said, behaviour is determined by attitude and attitude is determined by belief .We said when you see somebody behaving in a certain way, check the reason behind this in his attitude. When you have identified what attitude he has, find out what the belief behind the attitude is likely to be. The real thing that causes you to do what you do is beliefs. That if you think that people wearing white are covering up their sins, every time you see somebody in white, at the back of your mind you want to start investigating the sin they have done. It becomes part of your personality. And so my prayer and hope is actually as we discuss this, you learn to go beyond behaviour of for example accepting bribes and things like that, what makes you bribe or accept bribes. Thus I would really want to deal with belief system rather than just behaviour. Remember we are going through fifteen statements that an organization commits to follow before it can be described as an organization of integrity. We said such an organization will not only refuse to elicit for bribes, it will also not accept them and it will not even pay for them. Day 2 Matt 22 17 Tell us then, what is your opinion? Is it right to pay taxes to Caesar or not?”18 But Jesus, knowing their evil intent, said, “You hypocrites, why are you trying to trap me? 19 Show me the coin used for paying the tax.” They brought him a denarius, 20 and he asked them, “Whose portrait is this? And whose inscription?”21 “Caesar’s,” they replied. Then he said to them, “Give to Caesar what is Caesar’s, and to God what is God’s.”22 When they heard this, they were amazed. So they left him and went away. Commits to pay all taxes We now begin with the statement that an organization with integrity pays taxes. If you are a Christian, Jesus already said, give to Caesar what is Caesar’s. Unfortunately it is not you to determine what Caesar needs from you. Remember Caesar or your government is the one who determines, what tax the citizens or residents are to pay. Thus it means that if you really want to influence taxes, you must elect in the next elections parliamentarians who are not going to just keep increasing their salaries rather than development projects that increase national wealth, and therefore you have to keep paying higher taxes. Government, you know, can’t charge tax unless parliament approves. So all taxes that we are having, our own representatives are the ones who determined them. So you as a citizen can only influence it at that level. Get representatives in parliament who cannot approve bad taxes. Once the taxes are decided, then you have no alternative than to pay. My consultancy is young and new, and recently when doing my initial tax returns for Taruma Consultancy ltd, my tax advisor said, I can’t see VAT in your accounts. But I argued it is too small to be paying VAT. But he told me, that’s not the law. The law says, every consultancy firm must pay VAT. Why? There is not supposed to be any reason, the law just says it. You have no basis to argue for non-payment. So I have since then been paying. Many of us look for ways of justifying non-payment of some. So when you find an organization that is trying to justify not paying taxes, that organization must be seen as an organization that has no integrity. But I am going a little further than that. I am saying if you really are a person of integrity, owning a company of integrity, you will be willing to contribute to societal cost. You have driven on a tarmac road. You never built it. Somebody somewhere paid a tax that financed the road. So why should I want to enjoy being on that road and I am not contributing to its construction? You know that when security becomes a big issue, most neighbors organize their neighborhood security at their own cost. Do you know there are people there in that community who refuse to pay and yet enjoy the improved security? But what embarrasses me is when even religious leaders avoid contributing to community costs. The other day a bishop in the community refused to pay, and I heard them finding out what to do with him. Somebody is guarding you every night, and others are contributing and you are not contributing. You are societal parasite. That’s what you are. A societal parasite. The same thing with an organization, where others pay tax but you enjoy whatever the community has and you don’t want to contribute. So I wanted to emphasize that you cannot call yourself an organization of integrity, even if for example you are giving to the poor, and yet you are not paying taxes. In o0ne country in Africa when the presidency change and a hence new commissioner was appointed to take over the Revenue Authority, taxes moved from about two hundred billion, to over seven hundred billion within a few years. The GDP had grown at an average of only five percent. So GDP has grown by thirty percent, but taxes had grown by more than three hundred percent. What does that tell you? The taxes increase was not from the GDP increase, but taxes recovery from people who were not paying taxes before. Are you getting my logic? That if it is increase tax from growth in income, then the growth in taxes should grow at the same rate with the growth in income. The fact that you can see multiplying total tax many times tells you even with the small GDP before; they were not collecting taxes adequately. This means it is also possible that when we change the government, the taxes will come down, if the government has no integrity. The basic thing where they are getting the increased taxes is that when a businessman refuses to pay tax, earlier he had a place to appeal but with a new president he will be returned back to the Revenue authority. So the next time you realize there is nowhere to appeal, what do you do? You pay your tax. Of course they have also introduced ETR machines so that every sale has a tax receipt and hence the revenue authority does not rely on the business to tell the truth. If it was in earlier government, the ETR would never have taken off. Instead of saying it is the ETR we don’t want; you start saying it is the supply procurement system that you do not agree with. But the problem is not the supplier; it is that we don’t want ETR to stop us cheating on taxes. Government must create a system that forces us to honor paying of taxes. Day 3 Romans 13:6 This is also why you pay taxes, for the authorities are God’s servants, who give their full time to governing However the best thing is if people have integrity and chose to pay taxes. Even after taxes have grown, there are still people who have ways of avoiding taxes. Such an organization cannot claim to have integrity. The RA will never employ enough people to catch everybody. I believe they use probability. When everybody has made their returns, if they suspect you they do a thorough investigation. I don’t think the number of files they have they can go through all files. If you are not caught in that probability system, you can still continue cheating without anybody knowing. What I am saying is if you are of integrity, it is you that will volunteer the tax and not wait to be caught. You will declare the right tax voluntarily. I think you do this for three reasons. Number one, because you believe you don’t want to be a societal parasite, so you don’t want to enjoy things you are not paying for. Number two; because you know in many things government is helping the less fortunate from the taxes of the rich. The only way they can do that is for those with money to give so that the money can be used to help those without money. You are committed to a society that has distribution of wealth. So that when you pay tax, you are actually participating in your own way in helping to raise the wealth. Thirdly, you have a commitment to helping to improve society. Are you aware that if people have money, they don’t steal meager things? If you are assured you have food, then you might not steal bananas, although you might steal bigger things. So when you have improved the economy by paying taxes and of course also assume parliament will help in the distribution of wealth, and so the levels of income improve, people still steal but they don’t do petty crimes. You don’t put you underwear outside your house and fear somebody is gong to disappear with it. They go for big things, not small things like that. So in your paying of taxes is helping to make your neighborhood secure. The most dangerous thing you can have is to be rich in a community of poor people. Do you know what I am talking about? There is no way you will enjoy your food. So as you pay your tax, it is a way of ensuring you give yourself protection. As a point of digression, one of the things I am committed to is evangelism. I know that if and I do not invest in evangelism and if my neighbor doesn’t get saved, he will soon be the person who is harassing me. If he gets saved, that ceases. The same thing with the taxes. In as long as you are paying the tax and the tax is well distributed, you can start enjoying your remaining wealth. When you go buying a plot in an open place because normally they are the cheapest, you take a risk. If you go buy ten acres and then cut them into quarter acres. At that point if you go to buy it, it will go for twelve thousand or thirteen thousand. This is attractive because the next place which is already occupied, the thing is going for half a million. Here it is going twelve thousand. So you run and buy. You have no idea who will be your neighbor. if the wrong people start coming, you are better off selling the plot. So who is in the neighborhood matters? You must work to help your neighbors to be equally well to do. ……. So paying taxes is a way of distributing wealth. And it is not just for the benefit of the poor, it is also for the benefit of the rich. Of course I am being careful with my words because I know you can pay your tax but it ends up paying MPs salaries. That’s not the kind of thing I am talking about. I am talking about MPs who care. Most people really feel pain paying taxes and so to me this is one of the important measures of integrity. They look for every means possible not to pay tax. Haven’t you ever seen when it reaches the deadline for tax returns everybody will be going because all of us want to pay the last minute? You need to come and ask yourself, is tax a bad thing? And I am saying no. we have seen first of all it is biblical… you are told to pay. But also we have seen, it is a good thing. So I would rather that you have the attitude: I am proud to pay taxes. I am willing. In fact the words I am using here is, I am willing to contribute to societal costs. When I realized paying tax is not a bad thing, it really relieved me because I now have no problem with the issue of paying taxes. When it is just your salary it is deducted before you get your salary anyway. When you start investing in this and that, you have to decide whether to declare or not to declare your extra income… that’s when the temptation not to pay starts. My attitude is that, when God gives me twenty thousand, part of this money must help society. Then you do not think you own twenty thousand, you say you have two thirds of it. That’s a concept you need to have in your mind because if you have that concept, paying taxes will never bother you. The same thing with a company. If a company makes a profit of a million, you don’t start saying, I made a million. You must always think about your money as net profit after tax. And if that enters into your mind, paying TAXES will never bother you. If I get the letter informing me they employer has increased my salary of one thousand shillings, I feel very proud. Only to discover in my bank six hundred shillings only had put there... Initially you feel, this is theft. How can I get an increase of a thousand and the government takes four hundred? What kind of people are they? I am giving my personal testimony when I started working. I felt like it is terrible …. I am even planning what to be doing with one thousand. Just to discover, salary has just increased with six hundred per month. Until I realized, it is for my benefit as part of Kenya, it is in obedience to the scriptures. I should never think of my income as mine alone. It is our income together with society. I think if an organization leadership is thinking at that level, they will never be expecting more than profit net of tax. It will be net profit after tax. And of course income tax is not the only tax. There is VAT, and all kind of taxes that the government wants you to pay. I think one needs to be sure they are all paid. Day 4 Malachi 3:5 “So I will come near to you for judgment. I will be quick to testify against sorcerers, adulterers and perjurers, against those who defraud laborers of their wages, who oppress the widows and the fatherless, and deprive aliens of justice, but do not fear me,” says the LORD Almighty. Pay reasonable salaries and wages The next requirement if you are a company that has integrity, is that you pay reasonable salary and wages to all who work for the organization. This is dynamite. What do you mean? If you are an employer and are an employee, are we likely to agree on this one? No. It is impossible to agree what is reasonable. The word is not paying high taxes; the word is pay reasonable taxes. If you have a house assistant, a reasonable tax has already been determined by the government as minimum salary. It is not you to determine what is reasonable. It means if you are paying your house assistant less, you are a thief. For obvious reasons you are not the one who was left to determine it. That’s why I told you this is one of the toughest topics. Remember, if your salary is only twelve thousand and you are paying her eight thousand….tell me what sense that makes. It doesn’t look sensible, isn’t it? But then the point is, the key word is reasonable, reasonable is not as determined by employer and reasonable is not as determined by employee. Reasonable means reasonable to an independent man on the street. Are we together? I am in several Christian boards; I keep saying this is an impossible topic to them. I don’t recommend we as the board determine what is reasonable. I always say we must do a salary survey. What do organizations that are similar to ours, actually pay? For example if you are working for Barclays, they can’t pay far less compared to Standard without being said to be unreasonable…Because they are in the same industry. So they must do a survey among banks of a similar level on what is being paid. By the way every bank is trying to pay as little as possible, so already the method already has a problem. But they are also competing for the best talent, which is the theory behind salary survey. You are competing for labour in that area. So what are you willing to pay to get the best labour? That’s what helps you know what is reasonable. My recommendation is, do a salary survey, done not by a biased person, but an independent person who will get the facts as they are. A pension was looking at level of pension. Because the employer was contributing quite a bit in the pension scheme, he was really thinking that the pensions were too good. He kept saying, surely how can you get it this good? , I am also asking them about the kind of pensions they have in their countries. There is absolutely no comparison between the kind of pensions we pay in Africa and the kind of pensions they pay in Europe. In Europe you retire and you become a philanthropist because your pension is so good, you can also afford to travel all over the world. In Africa, even after you have a pension, you are still seeking to be an employee somewhere else. So the best thing is to do a survey. What I am trying to get you to see is, it is such a sensitive matter that almost any organization will have a problem. Day 5 Proverbs 11:17-19 17 A kind man benefits himself, but a cruel man brings trouble on himself.18 The wicked man earns deceptive wages, but he who sows righteousness reaps a sure reward.19 The truly righteous man attains life, but he who pursues evil goes to his death Please understand three things on wages. Number one, if you are paying unreasonably low wages, you have your employees for a short while because they are not likely to last for a long while... The minute they get an opportunity somewhere else, are they going to stay with you? No. So you have no stability with your employees when you don’t pay reasonable salaries. Number two, when you pay unreasonable salaries, you tempt your employees to steal. Because if people sit there thinking that their employer is a thief, you encourage them also to become thieves. I am not suggesting you should be paying high salaries, I am only saying you should be paying reasonable salaries. So that even if you move elsewhere to a similar organization, you are unlikely to earn much more than an additional ten percent, for example. Not double your salary for the similar job, in similar sector. If you feel reasonably well paid and you still steal,) because some such people still steal), you feel guilty. But when you feel like you are being underpaid, you feel tempted to steal. But thirdly, when you don’t pay reasonable salaries, you attract incompetent staff and in the process you don’t get high level of productivity. When you see people so happy to stay with you and they can’t go elsewhere and you are paying them so little, chances are even if they try to get a job elsewhere, they can’t get it. So you are happy your employees don’t run away from you, but the reason they stay with you is because they themselves are incompetent. So your productivity is affected. So it is not in your interest not to pay reasonable salaries. … Fourthly the reason why you must pay reasonable salaries is because integrity requires you to. You cannot be a person of integrity and then you still don’t pay reasonable salaries. So do not pay below government suggested wages. That’s one of the ways of measuring if salary is reasonable .When the minimum wage was set, was it inclusive of benefits? It is minimum, and you still must give housing. In other words, you have the alternative of either going to rent a house for the house assistant or giving her or him a room in our own house. So giving her a room in your place is not a benefit to be charged to her. Opinions on this are many. If wrong you will still be prosecuted in court despite your opinion. And number two, however unfair it is to you as an employer, you will still be prosecuted. So what does the law say? The word minimum, does it mean you subtract from the minimum any food she eats? Follow the law not the opinion. The other thing I want to emphasize is that salary law is not necessarily fair. Because if you started being fair, you have to compare her circumstance with employer circumstance and the other employee’s circumstance. Since parliament does not do that, it just makes one fair to the majority but it is might not be fair to some people. It tries to be but it isn’t necessarily fair to everyone. Anyway, all I am saying is, do not pay below government wages, and be within your sector salary levels. In other words you don’t call yourself unreasonable when banks are paying a certain salary you can’t afford if your organization is not in the banking sector. So salaries differ from sector to sector. So when we talk about reasonable it must be within a certain sector. For example you can imagine a house where we have no children…. compared with when my three children were young, it is a world of difference. We all go in the morning, the whole day the house assistant has nothing to do. Should you then pay her less? From the time our children became grown ups, whenever we take someone, we sponsor them to a school to do a course during the idle time. So should we be paying her less? After all, the fact that she can go to a full day school tells you she is not working. You must pay above minimum wages. Surely, when profit gets less, isn’t it reasonable that we start paying less than the minimum salary because clearly money is not coming in. So you must deal with the matter both as employees and employers. You can be calling yourself, as having no corruption, you don’t accept bribes, yet you are underpaying your staff. You are not a person of integrity. Even if you never take bribes, as long as you are not paying reasonable wages, you are not an organization of integrity. Day 6 Romans 13 Submission to the Authorities 13 Everyone must submit himself to the governing authorities, for there is no authority except that which God has established. The authorities that exist have been established by God. Obey government, authorities In another way, follow the law. You cannot be a person of integrity if there is a law which you are not obeying. Sometimes I consult as a petroleum expert. And recently we were in School of Monetary Studies where we were studying what changes the government wants to make to the Petroleum Act and the petroleum rules. And some of the rules they are coming up with are going to be pretty tough on the operators in the oil industry. But once passed you can’t decide you will not follow them. For example they are saying, nobody will become a transport contractor unless he has gone through a process to be pre- qualified. Oil companies might not want to do that. They go for the contractor who charges you cheapest. But the government argues no. With all petroleum fires we have had on the road, we want transporters who can manage transport safely, who must have certain amount of training. Thus it will be very easy to put the rules; to enforce it will be very difficult. They are also saying that no driver will drive a petroleum tanker unless he has driven other types of vehicles for ten years, previously, after he has gone through training on how to handle petroleum products... Easy to say that, enforcing will be very difficult. However unreasonable the government authorities are, you do not error at the side of disobedience. As long as the law is not interfering with your spiritual beliefs, with your worship of God, (obviously that’s not an area they are supposed to legislate), you obey. If everybody starts becoming the one who determines what is right and what is wrong, what is right to you may not be right to me, and we will end up in confusion. Also an organization of integrity will never need to fear being audited externally, being checked by the government. There is nothing they are doing knowingly that is breaking any government law or other government authority’s requirements. Of course you can be breaking it without realizing. Like my thinking that if your consultancy is just a small one, you don’t pay VAT...Yes, there are issues that may happen but not knowingly. That is why it is important that an organization seeks legal advice to ensure the way they are operating in whichever country, they are obeying the laws of that country. An organization of integrity goes out of its way to study the laws so that they know exactly what they are required to do. The same way I went to an tax expert who advised me. Day 7 Leviticus 25:35 “‘If one of your countrymen becomes poor and is unable to support himself among you, help him as you would an alien or a temporary resident, so he can continue to live among you Give back to society by remembering the less fortunate You need to select areas in society where you feel you would like to help. This way you are involved voluntarily in giving beyond the taxes. This is called CSR. But one of the problems I have had with CSR is the fact that they give for the cameras, isn’t it? I am even told after they have given that large cheque, some of them the cheque never is never cashed. The same thing is repeated every often because what they are after is the camera. It sounds really criminal. They do it so that the community can see them as a responsible member of society. If you are a person of integrity, you will not do it just for the camera. There is nothing wrong with the camera, but you will do it because you sincerely want to be a part of society that is disadvantaged. You need to see some changes within them. So how do you recognize an organization with integrity? It will want to be a good member of society by remembering the less fortunate. But it is again a difficult subject to deal with because unlike the minimum wage, there is no minimum figure. All we are talking about is, you are part of this society, and how are you helping the people in the society. In the bible the rich were to harvest leaving some for the poor neighbors. Similarly every organization is a corporate citizen with poor around them. Seek synergies to impact the broader society Then you must seek synergies to impact the broader society. What we are saying here is, work with rather than against others in your sector to benefit society. If you are talking about an organization that has integrity, it will not be so competitive against its competitors that it cannot discuss how as organizations they can work together to help their community. For example in petroleum industry, they formed something called petroleum institute, where all the oil companies come together to ask, what is it we are doing, as an industry, that is harming the environment, harming society? What can we do to stop it? So that some of the rules that are being changed currently under the new Petroleum Act are from discussions from oil companies. I know we are employing bad drivers; we need to find a way out of it. Of course one company cannot order the other, but we can discuss and ask government to enforce. Most industries now have what we call self regulation, where the group that is working in that particular sector come together to say, what should be our minimum standards? What standard is it we should not operate below? And if you are agreed, you help people. In other words you may compete on customers, but don’t compete by going below these standards. Let there be a minimum standard of operating in your industry so that the community benefits or is not hurt. But if you refuse to participate in such meetings, even if you are not in corruption, you still are not a person of integrity. The idea of organizations coming together to improve the offer to customers or to their clients by increasing the minimum standards is something you should be interested in. Thus you we are seeking synergies to impact the broader society. And synergy is what is the extra product of two people working together rather than working separately. Are you sure that competitive … real competitive people do not talk to each other? We are not suggesting you stop being competitive, but we are saying, outside competition, are there things that you can do together as an industry that helps to improve the industry. Develop employees and grow their competence In other words, a person of integrity in addition to paying reasonable salaries is interested in developing the staff. They are not just interested in the profits; they are interested in staff as stakeholders. If that house girl works with you, after three years, does she go back to be still a house girl? That’s what we are talking about. One of the things I can speak proudly about as a manager was my commitment, all my life as a manager, to see that whoever works under me, by the time I am no longer his manager, I would like to see him a better person. If you are not doing courses I say, why haven’t you thought about this? What are you doing so that you are not in this particular job forever? Whether I contribute in money, or just mentoring, when I see the person has done better, I feel that was the reward of being his manager. Develop employees and grow their competence. Regard employees as your stakeholders who must fully benefit from your business. Obviously that is true. If somebody’s competence improves, guess who is the first beneficiary? The employer. When you send him for a course and he discovers, a better way of doing something his productivity will improve. This is somebody who has worked for five years doing something in a wrong way. As a trainer, I know the employer paid my flight to Mombasa, paid my cost, if they start running their stock management the way they learnt it, who will benefit? The employer. But not just the employer, the individual employees. If they attend an interview in a bigger oil company, they will pass. So that by the employer paying me to train his staff, they develop the staff to be more marketable .which of course may look negative to the employer. But number two, it helps the person to start doing better in the organization immediately so that the company does not lose stock and any stock they will not lose, it will now be sold and bring an income to the company. Thus the employer also benefits. If you think training your staff is expensive, try ignorance. Of the two, find out which is more expensive to your organization. You must develop your employees and grow their competence because you will both benefit them and benefit you. It is our prayer that as we discuss these things, both as employees and employers, that we will know, what integrity requires and do it. What is it that God would want us to do in order to be a good organization and to act in a way that honors Him? We need wisdom and commitment to do it… Past meditations: www.johnnganga.org