Written by Penny Milner-Smyth on Monday May 15, 2017
There is a good chance that corruption is a subject of both personal and professional concern to you. If that is the case, it is a sentiment you share with individuals the world over. You are also likely to share with like-minded global citizens the view that corruption is a phenomenon that takes place at a distance from you, one that you cannot readily counter.
Just as we share with others a frustration at the seeming increasing levels of corruption throughout the world, so too do the many international and multilateral organisations that today bring together governments, governments and business, and even governments and business and civil society.
Whether it is a regional or global co-operation, trade or aid body, be it the UN and its many agencies or the World Economic Forum, the OECD or its equivalents around the world, today we find a unity of purpose: a commitment to playing a formative role in the achievement of a peaceful, poverty-free, prosperous and fair world order. It is a unity of purpose bolstered by the commitment of civil society organisations striving to keep this mission at the top of the global agenda.
One of the most significant threats to these efforts? Corruption. For corruption not only increases the cost of doing business, but it comes at a price that reduces the ability of nation states to deliver the basic services that provide a foundation for human development and advancement. In turn, the constructive participation of citizens in the political life of a country is limited, leading in the worst scenarios to methods of engagement that destabilise countries and disperse their citizens.
The past ten years has seen these international and multilateral organisations placing increasing pressure on countries to both adopt and enforce anti-corruption legislation. In response we are witnessing ground-breaking legislative and regulatory developments that are starting to exert a profound impact on the way that business is conducted the world over.
The US Foreign Corrupt Practices Act has just reached its 40 year milestone, and the ferocity and global reach of its enforcement has never been greater. Other countries have or are in the process of enacting legislation that builds upon the principles contained in the FCPA, while weaving even broader nets with which to catch the corrupt. As 2017 dawned, the terms of a deferred prosecution agreement entered into between the UK Serious Fraud Office and Rolls Royce (with a fine, disgorgement order and costs estimated at half a billion pounds) reverberated in boardrooms around the globe as the UK Bribery Act of 2010 came of age.
Even where businesses operate in environments in which anti-corruption provisions are seldom enforced and the risk of legal sanction is low, today’s technology makes it possible for individuals in remote locations to use their smart phones to film and upload to the internet evidence of unethical practices that can have the effect of ruining long-standing individual and corporate reputations. This development means that there is a steady reduction in the space available for corrupt activities to take place without exposure. It also means that investors are increasingly wary of risking their money in businesses managed in a manner that poses the threat of a catastrophic drop in market value, with no warning and often in the course of a single trading day.
These ‘citizen activists’ are having a complementary effect on the already bright media spotlight shining on corruption. Perhaps not coincidentally, we are witness to significant shifts in political support in diverse countries, with long-standing traditional allegiances seemingly abruptly severed. In a study published in the June 2017 edition of the journal, Information Economics and Policy, Sudipta Sarangi and Chandan Kumar Jha present a cross-country analysis of data from over 150 countries showing that the more Facebook penetrates public usage, the higher the likelihood of government corruption being met with protest action.
Where countries are making regulatory and enforcement strides, the extent to which anti-corruption legislation can have a social and economic impact through behaviour change cannot be underestimated. Anti-corruption measures implemented in 2016 had a profound impact on entire sectors and communities, in countries as disparate as South Korea and Switzerland.
In South Korea, where the introduction of stringent limits on the value of business gifts intersected with an established practice of rewarding citizens who report wrong-doing to authorities, there was an observed upsurge in ‘guests’ gate-crashing weddings in search of evidence of improper gifts being given to newly-weds. In Switzerland, a whole village whose economy was built around the production of a particular range of luxury watches, is reported to have experienced the sharp end of the market collapse when their expensive products were no longer in demand as corporate ‘gifts’ with not only South Korea but China taking a hard line against practices designed to influence decision-makers improperly.
It is very easy to dismiss corporations that have been the subject of public embarrassment or subjected to material law enforcement measures as having inherently bad intentions. But this would be a serious mistake that blinds us to the very real prospect that we too could find ourselves facing the same undesirable consequences. If you were to speak to many of the ethics and compliance officers in these subsequently vilified corporations, you would likely encounter well-intentioned people operating under a clear mandate to ensure good governance. In the extraordinarily complex business context that is today’s global economy, it is often in the retrospectively obvious and simple failure to pursue an observed red flag until resolution that a transaction intended to profit becomes one with punitive consequences.
For here is where the emerging anti-corruption standards become relevant to each and every business: the requirement that there is available evidence that adequate procedures have been put in place by the organisation to ensure that corrupt activities are disallowed, and that when they do take place they are uncovered and acted against in a manner that not only addresses the instance in question but deters the likelihood of further similar occurrences.
The required ‘adequate procedures’, a term introduced by the UK Bribery Act, demand a comprehensive review of almost every organisational policy and practice. If this were not enough, there is a further requirement that upturns any ‘business as usual’ approach, one that has yet to dawn on many: the requirement that a business takes responsibility for the extent to which there is anti-corruption compliance throughout its supply chain.
How, one may ask, would corrupt acts come to the attention of authorities, assuming that the parties involved are willing or unwitting participants? Detecting and investigating wrongdoing by a business is a time-consuming and expensive activity for enforcement agencies. Their solution is to incentivise disclosure and this is being achieved in a number of ways which include:
Taken together, these three trends present us with a changed reality: the increased likelihood that people who would otherwise have turned a blind eye to business practices that did not sit easily with them will disclose their information to regulators rather than risk being held responsible in their personal capacities. Without the protective umbrella provided by the old defence of ‘operating under instruction’, there will be individuals who weigh up the merit of maintaining employer confidentiality and loyalty in a way that falls on the side of the regulator rather than the employer.
At the same time, there will be those who in weighing up their options are attracted by the prospect of a bounty. While the US-style system of financially rewarding whistle-blowers may be yet to take hold the world over, it is important to know that US whistle-blower pay-outs are not reserved for US citizens and may be paid to foreign nationals who provide information that meets specified criteria. In fact, the odds are is that it was an Australian insider who blew the whistle on BHP Billiton over the alleged improper use of hospitality at the Beijing games when some of its remote subsidiaries failed to comply with disclosure requirements that would have protected it from allegations of attempts to ingratiate itself improperly with certain foreign officials. The US Securities Exchange Commission made a payment of $3.5 million to the unidentified whistle-blower.
And so we see that the spotlight on corruption, giving the impression of a growing phenomenon with perpetrators acting with impunity and escaping sanction, is in fact shining an ever-growing pool of light. Business leaders everywhere need to heed its warning and take action now in order to ensure that when the spotlight turns in their direction, which it will, they are not found wanting.
In the words of the US poet Henry Wadsworth Longfellow, ‘The lowest ebb is the turn of the tide’. Depending upon the country from which you read this, you may have yet to know just how low an ebb will be reached, but what is clear is that across the globe the tide is turning against corruption. Act now, or you may be drowned in an avoidable deluge.
Find out more about the ICA Certificate in Anti-Corruption today.
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