The United National Global Compact (UNGC) meeting in London recently focused on anti-corruption initiatives globally.  In recognition of the overall cost to business, and wider economy and society of corrupt practices, principle ten of the UNGC is: "Businesses should work against corruption in all its forms, including extortion and bribery."  

When the principle was first adopted in 2004, it was seen as controversial, not least because of business’ concern about a level playing field – in effect “how can we get ahead in new markets if others are bribing and we’re not”.  

Bringing together companies through initiatives like UNGC helps level that playing field.   In recent years  the anti-corruption landscape has intensified  with recognition that corruption brings with it a lowering of standards (right down to the product) and heightening of business risk.  In sum  - corrupt practices cost - so it is no surprise that tackling bribery and corruption is high on global agendas.

The highest growth markets are also the highest risk  as illustrated in TI’s Corruption Perception Index.  Meanwhile the established markets have been far from role-models with a spate of corruption scandals and cases of poor governance which has arguably led to the ongoing financial crisis.   So unsurprisingly the UK Bribery Act is capturing attention.  Together with the US Foreign Corrupt Practices Act (FCPA) jurisdiction is global and at the meeting the likelihood of the first substantial case being against a non-UK company was discussed.  

Under the FCPA a good number of non-US companies have been caught out, but what is significant is the dramatic increase in the costs awarded as well as the number of cases. The costs of corruption are starkly illustrated here, and it is no surprise that many of culprits are now the champions of anti-corruption.

Top 10 FCPA Settlements (millions)

[Slide: IBLF /Source: Paul McNulty, partner and head of Baker & McKenzie's Global Compliance Practice]

Brook Horowitz, of IBLF, discussed the various challenges companies face in Russia, India and China in adhering to extra-territorial anti-bribery legislation. 

For HSBC, a global bank, their senior compliance manager stated the key issue is to “know your customer”.  Due diligence is not something to be conducted at the beginning of relationship – but an ongoing exercise.   This applies just as much to your partners and your supply chain (and your staff!!). This is when the operating culture becomes central. 

It is this culture that firms who have fallen foul of the FCPA invest most in, for solid returns.  Siemens, Novo Nordisk, Statoil can all provide huge learning in instilling an ethical environment and reaping the wider business benefits.  It is no surprise that the VP Corporate Relations of Novo Nordisk recently commented in PM magazine “You could say that we handle company culture just as concretely as we handle financial performance”.

Other firms would be wise to instill such culture before being named, shamed and, increasingly, paying eye-watering settlements.  With the UK Department of Justice and the Serious Fraud Office no doubt on the look-out for their first big test case companies globally would be well advised to reflect.  And reform.  After all a $multi-million fine and additional costs of reputational damage and employee disengagement seems to be the wrong trigger for change.  Improving your business practice and strengthening performance the right one.

SURVEY:
During October, we are surveying members and students about their experiences and understanding of the ways ethics and sustainability are practiced in the workplace. Responses will be entered in a prize draw with the chance to win an iPad.  Complete it here.

UNGC - CIMA are UNGC participants as are many of the the leading employers where are members and students work.  Find out more about their activities and work in your region.

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