Two months later I was boarding the flight to Tirana via Milan: my first excursion to the Balkans. The occasion was the launch of the CGI Academy, a training initiative to change the perception of the role and conduct of the modern board member. The event was a half-day workshop that would highlight the purpose and usefulness of the academy, to be followed by a celebratory reception.
Within the confines of the EU, the USA and other well-developed market economies, we take much for granted. We have functioning capital markets with diverse shareholders; we have regulators we complain about, but who demand rigour in our processes; we have political and legal institutions that guarantee – to a degree – a framework that promotes trust. In such circumstances, speaking of the functioning of boards, the roles of directors and the science of decision taking, is quite straightforward. We generally speak to the converted seeking help in perfecting their governance, or to the sceptical, who nonetheless understand that, at worst, they have to make the best of endeavours to meet market and regulatory expectations. In the role of independent director on the board, or ILA instructor at the Chamber of Commerce, we can assume that everyone accepts the general truth: Better governance is better business. We are in our comfort zone.
What happens though, when these base conditions are stripped away? I am an amateur when it comes to understanding Albanian culture or political history, and I am the first to apologise if my following summary is rather simplified – but they are the impressions and lessons I came away with from this first, hopefully not last visit.
- Albania is amongst the very poorest countries on the European continent. It has progressed significantly since the fall of the one of the most suppressive of Communist regimes in 1991, it has developed dramatically – even if its GDP per capita still stands at around 30-35% of the EU average. It is a country still struggling to get back on its feet, and a focus on near term success is perhaps a natural by-product of the need to take each day as it comes?
- As I understood my guide, Albania’s culture bears the marks of a nation occupied for much of its existence. The influence of the Ottoman empire and Stalinism was only briefly broken by a period of nationalist independence. National pride is derived from references to Ancient Illyria and Medieval Albania, as well as their national hero Skanderberg who rose up against the Ottomans. The Albanian culture though seems closer to what one might romanticize as a Clan culture. Stories of strife and betrayal between clans abound, and one can easily imagine a natural disinclination to trust the stranger: the outsider. In the OECD, we find it natural to look down on chronyism – what though is more natural than to rely on those who you trust the most, when you do not trust the environment around you?
- Finally – and it must be said – corruption in all its forms is part of the system still. It was raised several times by different parties during my stay. Whatever the cause, and whatever the barriers to turning the page, it is a real challenge for people on the ground, and the companies that must operate within it.
This then, is an environment that is radically different from what “we” are used to, and it changes the context in which governance and corporate direction needs to be explained. Kiril Nejkov of the IFC, Beatrice Richez-Baum of ecoDa and I went through what constitutes best practice as laid out by all of the G-20, OECD and the EU – but what does this matter in the face of the very basic environment facing Albanian firms, in a country that is not a member of any of the above organisations? Shareholdings are dominant, either as subsidiaries of foreign companies, or family and partnership shareholders, creating a real challenge to argue the case for independent minded directors bringing a different perspective. How do you convince economic actors, seeking effective and immediate outcomes, that actions to control and mitigate corruption need to be taken – and are in their long-term interest - when short-term survival actually is the main issue? Governance is a key stepping stone to successfully cross over from being a small or medium sized enterprise, to achieving scale and building sustainable wealth. It is a tempting prize, but the case for making the investment needs to be forcefully made.
It was a fascinating trip I was invited to take to Tirana. We went there in the aspiration of helping Monika and Rezarta open the eyes of Albanian businesses to the benefits of good governance. We are all accustomed speakers coming from well-developed market economies, where we are in our comfort zone of shared assumptions. As I stepped up to address the workshop participants, I realised there was nothing to be taken for granted: we started with the first question that I felt sure was on everyone’s minds. Why do we need directors at all? Let the lesson begin …
This blog article first appeared in the January 2016 newsletter of Institut Luxembourgois des Administrateurs, Luxembourg. See their website.