It’s that time of the year again! December 9th is International Anti-Corruption Day, a day all anticorruption practitioners duly mark on their calendar. But this year has been very different from previous years.
Many small and medium sized enterprises have taken a severe a hit due to Covid-19 and their survival is uncertain in these times. Governments around the world have granted economic stimulus packages to struggling businesses in an effort to cope with the economic downturns and lockdowns. But resources granted under severe time constraints are the perfect recipe for more corruption and requests for bribes, especially in environments where there are insufficient accountability and oversight measures in place.
Today more than ever, collective corporate action is needed to RECOVER from this crisis with INTEGRITY and to promote a fair business environment. Only by putting effective corruption mitigation measures in place will a better recovery from the crisis be possible.
Here are six ways Ethics & Compliance practitioners may combat corporate corruption this year (inspired by Behavioral Ethics and the latest UN Global Compact’s findings):
1-Commit: Embed anticorruption in your company culture and operations. Demonstrate to your employees, customers and suppliers that your company has a zero-tolerance policy on bribery & corruption. To overcome a toxic culture of corruption, encourage your senior executives to make clear that they do not encourage nor condone wrongdoing. Senior executives also need to make clear that proper action will be taken in cases of misconduct. After a proper root-cause analysis and investigation, unintentional unethical behavior needs to be remedied, and intentional corruption needs be punished. In compliance jargon, this is referred to as “tone at the top”. Such zero-tolerance approach to corruption should however be balanced with a positive message about the type of behavior that the company expects from its employees. Consider incentives programs to reward employees for ethical behavior. Keep in mind that anticorruption ethics and compliance programs that strongly base themselves on detection and sanctions alone also send a message of distrust within an organization. In a culture of distrust, employees may be reluctant to voluntarily disclose misconduct and become disengaged under continual suspicion.
2-Assess: Assess your corruption risks and prepare for them. A risk-based approach corruption risk assessment means that companies should have an understanding of the relevant risks to which they are exposed. You should therefore be able to identify, assess and understand your risks, so you can develop measures to mitigate them. Corruption risks are however dynamic, so an effective anti-corruption risk assessment should not be an isolated, one-time event. For many companies annual risk assessments are the norm. But the frequency of risk assessments all depends on a company’s risk profile and resources, as well as events such as entry into new markets, significant reorganizations, and mergers & acquisitions. Below is an example of what a corruption risk assessment should look like and here is a more detailed guide on what the assessment may entail.
3-Define: Define your corporate culture values, goals, strategies and policies and obtain buy-in from colleagues. Obtaining the full support and commitment from all levels of management is essential for creating a culture that is driven by ethical values and implementing an effective anti-corruption ethics and compliance program.
4-Implement: Implement your anti-corruption program and policies throughout the entire organization. Also engage with business partners and their supply chains. Business partners, agents and intermediaries are very often the weakest link in corruption matters. Companies may concentrate on avoiding working with third parties suspected of corruption by conducting due diligence.
As would be the case with employees, approaching third parties based on surveillance and sanctions alone will focus most of your efforts on protecting the company if the third party violates the rules. By contrast, adopting a value-based approach to dealing with your third parties might help you partner with third parties who share common values and also help them create the right corporate culture to avoid corruption.
This is especially relevant in environments where corruption is rife. In countries suffering from systemic corruption where local agents are hired for customs clearance, or obtaining licenses or permits for example, these agents may have little choice but to pay bribes to deliver the goods and services to their clients.
In a “strict” compliance relationship with large companies, local agents might be driven to hide their activities. In a “trustworthy” relationship, local agents may report the matter to the company and engage with large companies in a collective action to reduce corruption in that specific business process.
Larger multinationals are encouraged to share good practices with third parties by participating in anticorruption collective action projects. In such environments where corruption is rife, collective action might be the solution to change the status quo. For example, companies could get regulators to intervene or set standards.
5-Measure: Monitor and measure the impact of your anti-corruption policies to identify what’s working and what still needs work. The anti-corruption program as a whole should be reviewed and evaluated periodically. Ensure your compliance program doesn’t become a long list of codes of conduct, policies, internal rules and procedures without assessing the outcomes of these processes and the impact they had on ethical and behavioral issues within your company. If your processes do not disrupt the problematic business model, your program runs the risk of “being sent into orbit”, in other words be seen as a necessary annoyance separate from core business operations. Your anticorruption program would therefore fail to change the values and working methods of the organization. This error is costly for any E&C program. As a result, a corporate culture of wrongdoing may remain intact. .
6-Communicate: Consistently communicate your progress to stakeholders (clients, banks, investors, suppliers, employees etc.) aiming for continuous improvement. Every type of stakeholder has a stake in the implementation of the antibribery program of a company. The expectations are however different: Investors want to see their expectations satisfied in the annual report for example, while suppliers and business partners may want to see a reference to the anticorruption program in their contract. Public opinion and NGOs might want see evidence of a third-party certification while employees want to see enforcement of the antibribery policies in their day to day operations at different hierarchical echelons of a company.
As a reminder, corruption is bad for society and bad for business. It poses serious financial, operational and reputational risks. The multitude of international enforcement actions against companies we have read in the media this year continue to demonstrate this. But ultimately, corporate corruption hurts everyone. The impact of corporate corruption goes beyond the corrupt individuals, the innocent colleagues who are implicated, or the reputation of the companies they work for. Corporate corruption particularly hurts the poor, and erodes the trust of citizens in their governments.
To spread the word on December 9, use #AntiCorruptionDay or #UnitedAgainstCorruption on social media.