ambassador remarks

Transparency in Democratic Society

Masaryk University Brno
May 15, 2007

Good afternoon. Thank you – all – for inviting me to Masaryk University.  It is always a great pleasure for me to be here in Brno and to be among students.  I’ve just come from a ceremony at the American Corner in the Moravian Library where the Embassy has set up a small collection of books and other materials on U.S. themes (politics, business and social sciences).  Professor Dancak has been a great promoter of the Corner and, hopefully, you are or will be taking advantage of this collaborative resource center.  The ceremony was to award a prize to the best Czech student essay – in English – about the United States, another joint initiative between the Embassy and Masaryk University -- thanks to Professor Dancak -- and the Fulbright Commission. 

It is always impressive to see the amount of serious study and scholarship about my country that goes on abroad in countries like the Czech Republic.  This is as it should be.  We get to know ourselves better through the eyes of others.  We also need to be humbled and proud at the same time knowing that the marketplace of ideas, and of academic freedom, transcends national boundaries. 

Which brings me to my topic today, if you will permit me one further digression:

This week over 50 grassroots organizations are sponsoring the first Whistleblower Week in Washington, a collection of groups who want to strengthen laws that protect federal employees from retaliation for ‘blowing the whistle’ on government waste, abuse, or fraud.  As you know, in one of the most famous recent anti-corruption cases in the United States in the private sector -- involving the giant energy conglomerate Enron -- it was a company employee who alerted her bosses and later public investigators and the Congress about the web of non-transparent financial practices that became the undoing of the company.  Blowing the whistle, or holding superiors – not just subordinates – accountable is an enshrined American tradition, both in private enterprise and the government. 

The first ‘whistleblower’ often mentioned in my country is a patriot from the times of the American Revolution – Paul Revere.  He rode by horse through the streets of Lexington, Massachusetts warning fellow colonists that the British were coming to arrest would-be revolutionaries.  He himself did get arrested but many of his famous compatriots escaped.   

The Enron case began six years ago and it was a wake-up call: since then we have weathered many storms in an effort to make corporate America more responsible legally as well as ethically.  The Sarbanes-Oxley Act was passed by Congress in 2002 and contains far-reaching provisions that force companies to implement strict internal controls in terms of financial dealings and accounting procedures. As a business lawyer for most of my life, I can tell you that conforming to laws and behaving in a transparent fashion has been the norm among my clients rather than the exception.

Talking about transparency, ethics in business and government, and living up to the highest standards of democracy is one of the things I am doing a lot these days – when I’m not explaining missile defense or visas…

The reason is that this is very much a part of the transatlantic dialogue today.  As economies grow, as our global network of trade and information becomes more complex and interconnected, several things start happening, and I’m sure they come as no surprise to you:

- competition becomes fierce;
- commerce itself is less and less restrained by national customs and laws;
-     bureaucratic rules multiply;
- specialization and centralization pull the decision-making-process apart;
- and political leaders often get caught in the middle.

In this environment ‘who’ is accountable and ‘what’ is transparent seem harder to define.

Yet, democracy, at least in the western liberal sense, derives its legitimacy from consensual, cooperative and connective power-sharing – in other words, it is non-coercive and decentralized -- part of the magic formula for transparency.  As an author you may certainly be familiar with, G. John Ikenberry, has written: by providing numerous points of access to competing groups, the fundamental character of liberal democracy is its openness and transparent nature; it is a system that rests on multiple power centers that sometimes balance each other, sometimes are in conflict with each other, but serve as counterpoints to each other.  When power is diffused throughout the system; it’s harder to cheat.  When civil society serves to monitor and influence transactions throughout the system, it’s harder to cheat. 

Now let’s look at things closer to home.  The Czech economy continues to expand at an impressive pace.  Huge credit goes to Czech entrepreneurs, workers and researchers.  They have been quick to respond to the opportunities of a free and open market economy and channel profit into growth for the nation as a whole.

But unfortunately the prosperity of today may be jeopardized tomorrow by high taxes, excessive bureaucracy, labor market inflexibility and less than full transparency in business deals and practices.  These are liabilities that could eventually outweigh the attractions that have led so many foreign investors to look to the Czech Republic since the early 1990s as a place to do business.  Countries to the East are hungry for foreign investment.  The Czech Republic can not afford complacency or status quo.  As you look to your future in the global economy, here’s where you can make a difference.

How big is the problem? Transparency International ranked the Czech Republic 46 out of 163 countries on its “Corruption Perceptions Index.”  They note, and others agree, that the government procurement process and excessive political influence in public contracting are issues here.  Equally troubling, the World Bank found that the Czech Republic is the most corrupt country in Central Europe.  The Bank estimates that the informal “Bribe Tax” represents 3.6% of business revenues in this country. 

Without question, this is a drain on the economy and a warning signal for current and future business people.  And corruption is taking its toll on the political system too.  Many citizens are growing disillusioned, and observers predict a decline in political participation as a result.  For a country that has worked so hard to achieve democracy, this is a state of affairs that must change.  And it can change.  So when we talk about transparency, we’re talking about concrete measures that open up government and the economy to all participants.  We’re also talking about fostering an attitude that resists cynicism and a defeated, get-along-go-along attitude. 

Certainly, we should not ignore the progress that has been made.  Czech tax legislation now expressly denies deduction of foreign bribe payments.  Bribery penalties for public officials have been stiffened and there are new proposals to increase sentences even further.  Recently, a private company also worked in cooperation with the police in the arrest of their employee who accepted bribes in exchange for awarding purchasing contracts.  Additionally, the dialogue between citizens and politicians on key issues like the possible U.S. radar facility is now characterized by an openness that most democracies would envy (even if many citizens might not agree with the base or with my statement – that’s part of the process).  Moreover, I see a growing acknowledgment that a lack of transparency threatens the long-term prospects of Czech economic growth.  But more needs to be done.  Sustainable prosperity depends on further reforms.

What is the role of students like yourselves who are looking forward to graduation and may be starting out in business in a few years?  Entrepreneurs, business owners, and successful companies not only create jobs, they shape attitudes.  Many of you will join companies that use a value statement or code of ethics to govern their activities.  You will play a crucial role in sticking to these values.  Your generation will get rid of the damaging ethic of “anything goes”.  Sooner than you might expect, you will be in a position to decide that your firm will be a good corporate citizen and a positive force for change. 

Corporate Social Responsibility (CSR) includes these three elements:
One, a commitment to strong, sustained economic performance;
Two, rigorous compliance with accounting and legal requirements; and
Three, ethical actions beyond what the law requires.

Research shows that a strong corporate social responsibility strategy has clear rewards.  There’s the human resources benefit – it increases employee loyalty and retention.  It helps a company attract the best talent.  There’s a marketing benefit – it cultivates customer loyalty and respect.  And there’s a third benefit.  Corporate social responsibility fortifies a company’s most important asset – its reputation. 

Corporate social responsibility and transparency aren’t just American business values. Yet some people still say that corporate social responsibility – or transparency, or an economy without corruption – can’t work as well in the Czech Republic as it does in other countries.  And while I often hear Czechs express their frustration with the system as it is, there remains, in some circles, a lingering sense of “that’s just how it’s done here.”  That needs to change.  And it can change.  The same holds true in government and in any sphere of human activity.

I want the American Embassy to practice what we preach.  In fact, transparency is a major component of the two hottest items on the bilateral agenda:  visas and missile defense.  We’re looking at how we can simplify the visa program.  President Bush is working to move the Czech Republic closer to visa waiver.  In the meantime, I want to make the process of applying for a visa simpler and friendlier.  Our efforts to streamline the visa application process are part of this effort.  Shortly, you will be able to arrange an appointment for your visa interview directly over the internet without paying for mailing, faxes, or special delivery.

On missile defense, we know that much of the public concern about the proposed facility can be addressed by a greater flow of information and transparency.  As I mentioned earlier, the Czech government’s response since Washington first made our offer to begin talks on the proposed radar facility has been a model of openness.  Earlier the Embassy launched a new web page to provide more information and the Czech Government has also reciprocated with a new website of its own.  Czech Members of Parliament have visited the radar facility in the Marshall Islands to gain first-hand experience of what the radar looks like and what impact it has on the environment, and the head of the Missile Defense Agency visited Prague to meet with the government as well as the opposition and to answer questions.  In this spirit of transparency, in the coming month, technical experts will visit the Czech Republic to answer more questions that local communities have about the radar.

In conclusion, real change comes from within.  As the next generation of political, cultural, and business leaders, each of you is an ideal advocate for civic-minded citizenship, transparency, and solid business ethics.  I urge you to hold on to these ideals as you move up your career ladder. 

Thank you very much.