Key Challenges to Ethical Business in Türkiye

Humans have to live as a society in solidarity with others for survival, security, and continuation of the species. Equity (fairness) and cooperation must be core values in these societies if these three basic objectives are to be secured. The survival and progress of societies depend on cooperation which in turn depends on equity and fairness.

Ethics and the law

Although it is far from being ideal, justice is the best means humankind has developed to realise these values. Peaceful co-existence of humans in a society, be it a small community, a country, or the whole world, requires, at minimum, that justice prevails.

Humans are not born equal. Each human, by nature, possesses physical, intellectual, creative, cognitive, and experiential differences to name a few. Humans, out of this substrate, voluntarily relegate their personal interests because they need each other’s strength. Compromise between differing interests creates the basic rules of ethics in a society. Voluntary compromise inculcates a feeling of perceived justice, contentment leading to the belief of equity and fairness. The feeling of justice is experienced when either a compromise is secured or second to compromise when previously (and fairly) agreed-upon rules of behaviour are fairly and accurately applied by an independent and neutral person. Therefore, compromise must be the first objective of legal and judicial systems purporting to realise true justice, and through it, equity in societies.

Ensuring conciliation and compromise – upholding the basic rules of ethics – of conflicting interests strengthens coherence, cohesion, cooperation, and solidarity among members of societies. This is how the prevalence of a basic ethics sets the basis for peaceful coexistence and brings in justice and prosperity.

In an ideal civilization, ethics would suffice to achieve compromise and therefore justice or vice versa and consequently solidarity, cooperation, and prosperity. Such a society need not have or put in place enforceable rules of law. However, reaching such a civilization is far beyond realistic, and possibly a utopia.

A more obtainable society is one where differences and poles in a society can compromise such that peaceful co-existence is possible. I mean to describe a society that achieves something beyond tolerance, where the differences are welcomed, so that voluntary compromise is ensured.

Ethical rules guide individuals to determine whether a behaviour is good, bad, right or wrong, and whether it will be approved in society in a given situation. Ethics include all rules – whether written or not – that determine behaviours. In a sense, ethical rules cover a much broader penumbra than legal rules and fill in the gaps left by legal rules when it comes to determining behaviour. However, individuals do not adhere to and heed ethical rules as a rule; rebelliousness is one of humans’ basic natural traits. When societies wish to make ethical rules applicable to everyone ethical rules are promulgated into law enforceable legal rules thus enabling the application of ethical rules to everyone.

Legal rules can introduce new ethical norms aiming to develop society’s ethics. That said, a society’s ethics can determine if and when legal rules are enforced. The promulgation of an ethical rule through a legal rule does not guarantee its alignment with societies’ ethics. The application of legal rules and the ethical rules therewith requires a social ethic of the proper application of legal rules.

Only a limited portion of ethical rules are and need to be set in enforceable legal rules. Ethical rules may function to fill in gaps in behavioural principle left by legal rules. However, ethical rules may at times be mistaken for accessories to legal rules.  Such confusion leads ethics to be treated as a luxury accessory that may be omitted from consideration. The making of laws to improve ethical values or to introduce those developed in other societies can exacerbate this confusion. Business ethics is an important area in which one may observe this confusion.

In todays’ near-wild economic environment in Türkiye where survival is the first and foremost objective of business enterprises, minimal compliance with the enforceable rules of law is considered sufficient and the adherence to ethical principles is often omitted.

Current State of Business Ethics in Türkiye

It would be fair to say that the principles of ethics known as “Ahi Principles” developed in the 12th and the 13th centuries in Seljukian Anatolia by the renowned philosopher Ahi Evran form the backbone of a strong and deep-rooted Turkish business ethics. Despite their age there exist scholars striving to adapt them to the modern age while small and medium businesses, mostly in Anatolia, adhere to and try to apply them.

The Turkish business world nowadays is evolving from this strong and rich ethical heritage, with an increasing shift towards global standards. Hence the principles and values of business ethics promoted by the UN Global Compact are also generally and readily accepted in Türkiye.

Efforts to promote business ethics in Türkiye gained strength and speed after the enactment of the Foreign Corrupt Practices Act in the USA, the OECD Anti-Corruption Convention, the UK Anti-Corruption Act, and the anti-corruption criminal code provisions in Germany. The introduction of vicarious criminal liability of company executives with only one defence available. i.e., the establishment of effectively operated compliance departments in their companies have greatly supported the implementation of universal business ethics principles in the business world in Türkiye.

The umbrella organization of the Turkish business world, the Union of Chambers and Commodity Exchanges of Türkiye (TOBB), which is a semi-official public institution, has adopted and advocates these values. The Business Ethics Rules advocated by TOBB can be summarised in the following categories:

  1. Integrity and Transparency
  2. Compliance with Laws and Regulations
  3. Sustainability and Social Responsibility
  4. Employee Rights and Fair Working Conditions
  5. Prevention of Conflicts of Interest
  6. Whistleblowing and Reporting of Ethical Behaviour

While larger Turkish corporations may have well-established ethics and compliance programs, small to medium-sized enterprises (SMEs) often lag behind in formalizing these practices due to resource constraints.

Leading actors in the business world and non-governmental organizations have published extensive literature on this subject. If we take the UN Global Compact’s 10 principles as a basis, we see that the currently prevailing understanding of universal business ethics in Türkiye may be fully consistent with internationally agreed business ethics.

Below is a summary analysis of specific Turkish laws and regulations corresponding to each of UN Global Compact principles:

Human Rights

  • Principle 1: Support and Respect

Ensured by Article 12 of the Turkish Constitution, Article 12 guarantees fundamental human rights and freedoms. The Human Rights and Equality Institution of Türkiye was formed by Law No. 6701 aiming to protect and promote human rights and ensure equality.

  • Principle 2: Non-Complicity

Ensured by the Turkish Penal Code, Article 77 – prohibiting crimes against humanity, ensuring non-complicity in human rights abuses.

Labor Standards

  • Principle 3: Freedom of Association

Ensured by Law No. 6356 on Trade Unions and Collective Bargaining Agreements which provides the right to form unions and collective bargaining. However, restrictions and governmental interference in union activities are still reported.

  • Principle 4: Elimination of Forced Labor

Article 80 of the Turkish Penal Code criminalizes human trafficking, including forced labor. Labor Law No. 4857, Article 5 also prohibits forced labor.

  • Principle 5: Abolition of Child Labor

Labor Law No. 4857, Article 71 sets the minimum age for employment and prohibits child labor. Despite this, child labor persists in agriculture and informal sectors and among irregular immigrants from Syria and Afghanistan.

  • Principle 6: Elimination of Discrimination

Labor Law No. 4857, Article 5 prohibits discrimination in employment due to language, race, sex, political opinion, philosophical belief, religion, and other similar grounds. Law No. 6701 addresses broader issues of discrimination issues.

Environment

  • Principle 7 & 8: Precautionary Approach & Environmental Responsibility

Environmental Law No. 2872, Article 3 promotes a precautionary approach to environmental protection. Law No. 2872 requires businesses to take responsibility for environmental impacts and adhere to relevant regulation.

  • Principle 9: Environmentally Friendly Technologies;

Law on Renewable Energy Resources No. 5346 encourages the use and development of renewable energy technologies. Various government incentives for green technology adoption exist.

Anti-Corruption

  • Principle 10: Anti-Corruption;

Turkish Penal Code, Article 252 criminalizes bribery and corruption. The Ethics Commission works to combat corruption within public institutions. The Law No. 3628 on the Declaration of Property and Combatting Corruption and Bribery exempts MPs, ruling politicians and high-ranking public officials and other public officials, making it almost impossible to combat high level and large-scale corruption and bribery amongst state officials.

Türkiye has established various laws and regulations to align with the UN Global Compact’s business ethics principles. However, challenges remain, particularly in ensuring widespread and consistent implementation across all sectors. Additionally, there are substantial legal issues negatively affecting the implementation of business ethics principles, some of which are outlined below.

  1. Absence of full and frank disclosure (failure of transparency)

The most deleterious factor that impedes social morality, hence business ethics, is the failure to implement the principles of transparency and integrity in dispute resolution in civil court litigation process. On one hand this failure paralyzingly heavy workload for the judiciary, renders it unable to perform its ordinary work. On the other it erodes society’s truthfulness and honesty, undermining trust among individuals, damaging cooperation and solidarity among economic actors, embattling the institutionalisation of professional management, preventing businesses from realising synergies and limiting their economic success.

Parties to a commercial contract are not obliged to tell the truth to the court or produce evidence against them when a dispute arising from that contract is taken to court. Some legal academics view lying to the court in legal proceedings as a defence right; they argue that it is reasonable not to disclose information and documents for the honest and truthful resolution of the dispute.

Although the rule of honesty and the obligation to tell the truth to the court was introduced in Article 29 of the Turkish Code of Civil Procedure enacted in 2011, it is ineffectual. There is no mechanism in the law to ensure that the truth is told to the court, and there is no sanction for not telling the truth, concealing facts, and evidence. There is no sanction for those who do not present the material evidence against them regardless of its importance to fair resolution of the dispute at hand.

Judges are loaded with nine-tenths of the burden of discovering the material truth among other judicial tasks, while lawyers are denied the authority to search for and collect evidence in order reveal the material truth to the court. The fact witnesses can’t be compelled to disclose the facts fully and accurately to the courts. While witnesses can be compelled to attend court, they are not obliged to answer the judge’s questions truthfully. Unless the witness testifies falsely in a way that affects the judgment, the witness has no responsibility.

An ordinary, truthfully honest citizen who encounters judicial authorities for the first time learns from experience that telling the truth disadvantages him or her and is incentivised to mislead the court. Such a disfiguration of honest individuals into, effectively, liars does lasting damage to ethical rules of honesty and truthfulness. Their complicity in such an unethical process propagates dishonesty through the society, encouraging people to lie, or at the minimum conceal the truth. This very peculiar situation before the courts of law, the place of last resort for dispute resolution where rules of law are forcefully applied, almost, forcefully displaces honesty and truthfulness in society, be it enterprises, families or relationships. It signifies a society’s disavowal of the values of honesty and truthfulness.

  1. Business world’s resistance to transparency

A second and interesting example in this vein occurred when the New Turkish Commercial Code was introduced. The New Turkish Commercial Code, developed under the leadership of Prof. Dr. Ünal Tekinalp, required the relationships between commercial companies and their shareholders and managers, who are generally family members, to be made fully transparent and accountable, consistent with international standards.

However, the Turkish business world pressured the government of the time to drop the regulations that would institute this transparency, arguing that these changes were too burdensome to comply with at the international level. Nonetheless, the innovations introduced by Prof. Tekinalp increased transparency and accountability of Turkish companies.

Relationships between shareholders in publicly traded companies became more strictly regulated. That a manager of a public company who carried out a related party transaction between the main shareholder holding 99.8% of the capital and the publicly traded company was sentenced to imprisonment evidences this.

  1. Combating corruption and bribes

A third example can be found in legislation regarding the prevention of corruption and bribery. Türkiye is a member of the OECD Anti-Corruption Convention and the Financial Action Task Force (FATF). The 9th and 10th paragraphs added to Article 252 of the Turkish Penal Code, which defines bribery and extortion, implement the OECD convention in Türkiye. Paragraphs 9 and 10 form the basis for investigating corruption and bribery crimes committed abroad. Türkiye is also a member of GRECO, the Group of States Against Corruption, formed by some member states of the Council of Europe. Türkiye is currently on the OECD FATF grey list. Treasury and Finance Minister Mehmet Şimşek stated that Türkiye would be removed from the Grey List in June 2024.

Bribery, extortion and the most serious corruption forms involve public officials and the business world who engage with them in the ordinary course of business in connection with public tenders, grant of public incentives, subsidies and the like. Therefore, the offences described in Article 252 of the Turkish Penal Code concern both the public officials and the private business persons. In the event of a bribery both the public official and the private parties must be prosecuted and sanctioned under Article 252.

However, according to Law No. 4483 on the procedure for investigating public official’s offences, as a general rule – except in exceptional cases – prior permission from their administrative superior is required to investigate public officials for their offences. For this permission to be granted an administrative investigation needs to be carried out first within their institution. Until such permission is granted, judicial authorities can do nothing but forward the notifications made to them to the relevant administrative authority.

Law No. 3628 on Declarations of Property and Combat Against Corruption and Bribery states that such administrative permission is not required for investigating corruption and bribery crimes, creating the impression that the judiciary can freely investigate such offences. But it is an illusion, perhaps an intentional one.

That is because the provision in Law No. 3628 does not apply to a broad category of public officials who are governed by special laws. Offences of high-ranking public officials, members of the judiciary, ministers, and the president require prior permission under Law No. 4483 for investigation, as they are all governed by special laws. For members of judiciary: the permission of the Council of Judges and Prosecutors is required for judges of first instance courts, and the permission of their colleagues in the Supreme Court and the Council of State is required for members of these courts. According to Articles 105 and 106 of the Constitution, a proposal for investigation must be made by an absolute majority in the Turkish Grand National Assembly, that is, 301 deputies, and a decision for investigation requires the positive vote of 360 deputies, that is, the number of deputies authorized to decide on a constitutional amendment for a referendum.

President and ministers enjoy a de facto impunity because the quorums requirement cannot be met even if the ruling party MPs voted for their prosecution. The Council of Judges and Prosecutors did not permit investigation of judges which the Anatolian Court Public Prosecutors reported were taking bribes. Turkish Court of Cassation decided that it was not worth investigating the Der Spiegel article claims where it claimed that a German Bank had bribed members of the Court of Cassation. It is widely bemoaned in society that corruption is widespread but politicians, public officials and members of judiciary as well as court appointed experts who are involved in corruption enjoy impunity for their offences. This state of affairs promotes a culture of corruption, and co-opts those who have no choice but to deal with these cliques into a corrupt and unethical system.

Conclusion and Recommendations

Due to these conditions, it is left at the discretion of business organizations to voluntarily implement the principles of integrity and compliance with laws and regulations in Türkiye. It needs to be recognised that voluntary compliance with anti-corruption rules alone does not suffice to avoid corruption. For example, companies need to resist public officials’ attempts at extortion and they must shy from pursuit of political influence. The two examples mentioned above demonstrate that the immense difficulty of resistance to corruption where the government controls the business environment. Especially in large infrastructure projects involving large amounts of public funds and those influenced by international political relations, it is inevitable that crimes of corruption, bribery, extortion, or influence peddling will occur. This is especially true as lobbying activities carried out through local strategic partners, who are bound to engage in practices amounting to influence peddling and corruption.

Corruption violates almost all universal business ethics principles. Where there is corruption, there is no integrity; transparency and accountability disappear, cronyism replaces compliance with laws and regulations, and social morality, starting with business life, collapses.

Corruption and bribery create a complex web of hidden relationships that a country’s internal systems cannot solve. The internal and often corrupt dynamics of countries prevent escape from this intricate web of relationships. Türkiye’s current regulations do not allow or provide the means to effectively combat corruption within the country.

Dwelling extensively on business ethics while ignoring how to secure their implementation justifies criticisms that business ethics is used as a means to whitewash unethical and illegal practices of businesses. Therefore, political influence peddling, anti-competitive practices and the like must be treated the same as serious violations such as bribery and extortion and must be properly fought internationally.

Thinkers interested in business ethics, policymakers, and international organizations need to focus on how to effectively combat corruption, and focus on creating novel international dispute resolution mechanisms similar to the International Court of Justice, International Criminal Court, and International Centre for Investment Disputes Resolution.

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