Transparency Watch (TW): You’ve been with Norsk Hydro since 1983. What changes has the company undergone in this time? Was there a moment where it was clear that there were transitions in the business norms and culture? What caused this?

Arvid Halvorsen (AH): In the oil industry, which I know best, it has been a gradual development. In the 1970s, I saw suppliers coming into the offices of decision makers with televisions, cases of whiskeys and wines, in connection with award of contract. These kinds of things are not common anymore, at least not in Norway. In the early 1980s, such practices started to disappear. Now we send out letters each year to all our suppliers and ask them not to send Christmas presents to any of our employees or invite them to parties.

TW:How are you involved with Transparency International (TI)?

AH: I am a personal member and a member of the board of TI Norway. Norsk Hydro contributes financially to TI Norway. My predecessors at Norsk Hydro were also involved in the creation of the Business Principles for Countering Bribery (BPCB) and I have served in the Steering Committee for the Business Principles.

TW:How do you use the Business Principles in your work in ensuring compliance in Norsk Hydro’s work?

AH: Well, we have publicly announced our support for these principles. One of the commitments for businesses in the principles is to develop a programme for countering bribery.

We started a programme to this effect in 2004, called the Hydro Integrity Programme. It includes provisions on business ethics, anti-corruption and human rights because we saw that these issues were connected. We began by identifying the scope of the programme and then identifying the program elements, based on a comprehensive survey made in our organisation.

The CSR Department developed a handbook with requirements and guidelines (available in 10 languages) that reflects the BPCB and covers issues such as management of agents, facilitation payments, etc. We began a campaign for this programme in 2005, and throughout the year carried out about 100 meetings, training more than 2,000 managers and senior personnel on the handbook content, and how to train the people they manage.

Other elements in this campaign have been to arrange full day work shops on anti-corruption, with contributions from TI and TRACE. The Integrity Programme also was incorporated into corporate training programs.

TW:One of the often stated shortcomings of such trainings or handbooks is the lack of specificity. Is there some way you get around this?

AH: As part of our training workshops, we have dilemma training – discussing and suggesting appropriate course of action in challenging situations. For example, on facilitation payments: what do you do if an important spare part for your plant is stuck in customs and it is clear that some grease money is required to get it out?

Our policy on facilitation payment is to work towards its elimination. Payment may be made if there are no alternative and if it is not illegal. Superiors shall be involved in the decision, if possible. Any payments shall be reported and shall be recorded properly in the accounts. Also, an action plan shall be developed to mitigate risk for occurrence of similar situations in the future.

TW:How do you ensure consistency in compliance measures in all your operations?

AH: It is really a never ending campaign; it’s a process of continuous improvement. In addition to the management teams training, a very important step has been to integrate the Hydro Integrity Programme into our system of annual business planning (budget, targets and work plan) and in our formalised decision making processes.

Because of the scale of our business, we also have the challenge of satisfying ourselves that the practices of all the people we do business with are up to our standards. We have introduced anti-corruption standards in our procurement process by making formal demands on our suppliers and contractors. We use a supplier declaration that suppliers are required to sign, committing them to a certain standard of anti-corruption, human rights, labour conditions. If there are discrepancies, an action plan to achieve conformity will be required. Hydro has the opportunity to audit the suppliers on the supplier declaration issues.

TW:What has been the involvement of Norsk Hydro with the Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises? Have any complaints been brought against you?

AH: We comply with the OECD Guidelines, and have publicly announced that we support them. No complaints have been brought against us.

TW:Before you took up the post as Senior Vice President, Corporate Social Responsibility, you worked as the head of the Moscow Representative Office and Oil and Energy Russia Business Unit (2001-2004). Were you based in Russia? Did working in such a different business culture pose any challenges?

AH: Yes, I have worked with business development in Russia for many years and I lived three years in Moscow. It is a very challenging country in many respects. Our success in Russia has been limited, and several of those foreign companies that have had some success seem to have run into their share of problems. If we would have been willing to be corrupt, I am sure that we would have come a lot farther.

TW:Where are some of the most challenging environments for a multinational firm like Norsk Hydro to operate? How do you get around that?

AH: The most challenging environments are when we are asked to set up new operations in developing countries in Africa or Asia.

What we try to impress on our business units setting up abroad, is that they should, at the very early stage of the process, bring to the table our Integrity Programme. This would include explaining the principles of Norsk Hydro, and asking for what the principles and requirements of our potential business associates are, to see if there can be a basis for cooperation.

Some business people are reluctant to do this, but it is much better and easier to clear this up before cooperation is started than to bring it up at a later stage, or to sweep it under the carpet.

TW:What specific challenges or risks does working in the oil and gas sector have for business, concerning corruption?

AH: This sector is a prime target for corruption because of the large sums of money involved. As oil becomes scarcer and price goes up, the competition between companies for access to this oil increases as well and corruption risk increases. In many countries, there is inadequate separation of private and business positions and finances, or inadequate separation of government and private sector. Also, ownership in companies is often concealed.

TW:Do you see any differences between this sector and the company’s aluminium holdings?

AH: Aluminium is to some extent in the same boat as oil and gas. A little bit less money involved, but is similar to oil and gas in being a risk area for corruption. Like oil and gas, the aluminium industry was in some countries government owned, and has been privatised in the last years in obscure ways.

TW:What do you think the oil and gas industry can do to increase the standards of transparency? Is the Extractive Industries Transparency Initiative (EITI) the only bar?

AH: EITI implementation is a big step in itself, but it only covers a piece of the action by making the operating space for the corrupt a little bit smaller. More is required and there is more that can be done. If companies were to start discussing more openly with each other and cooperate more actively on anti-corruption, it would help to take corruption out of the competitive landscape.

TW:Norsk Hydro will soon merge their oil and gas activities with Statoil (October 2007). How do you think this merger will influence the standards of transparency?

AH: My impression is that the integrity level in Statoil is absolutely up to standards. We are actively blending the best from both companies into the new company (StatoiHydro), also within business ethics and anti-corruption.