Strong management the key to curbing bribes and corruption

Dec 06 2006 by Nic Paton Print This Article

Leadership and strong management are the keys to cracking down on corruption in corporate life, especially the increasingly pervasive temptation to "grease palms" when operating in emerging economies such as China, Brazil, Mexico and India, new U.S research has argued.

A study by The Conference Board has emphasised how the commitment of senior corporate management leadership, alongside personal convictions, can act as a real catalyst in strengthening anti-corruption programmes.

Its study of 165 multinational companies, conducted by The Conference Board and The Ethics and Compliance Officer Association, found that most firms did not cite a specific business case for cracking down on corruption.

"Instead, they believe that it is part of a larger effort to build a culture of compliance within the company one that is rooted as much in the company's system of values and beliefs as in the need to respond to the developing global legal and regulatory regime that is transferring much of the anti-corruption prevention, detection, and enforcement burden to the companies," said principal researcher Ronald E Berenbeim.

A third said senior management leadership and conviction were the single most important factors in their company's decision to develop an anti-corruption programme.

Companies now, as in a similar 2000 survey, most commonly cited legal or ethical considerations as justifications for investing in anti-corruption initiatives.

"Company anti-corruption practices and procedures have become significantly more widespread, detailed and sophisticated since the 2000 report," said Berenbeim.

"In some companies, reported incidents of corrupt activity have actually increased, but this is attributed to better reporting systems rather than an increase in corruption.

"And there is a growing recognition among U.S. companies of the need to adopt an ethics-based approach that emphasises adherence to broad principles rather than narrow compliance to specific rules," he added.

More firms (two-thirds) said their company now had a formal anti-corruption programme than in the 2000 survey (half).

Company anti-corruption statements were also more detailed and precise than they had been in the past, it found.

Such programmes were also more subject to high levels of review. More than three-quarters of firms polled reported or in some cases had dual reporting relationships to a board member or board committee.

Chief legal officers were much more likely to be involved in all phases of the programme development, implementation and monitoring than they were in the past.

In addition, companies were now more likely to seek outside assistance in some aspect of their anti-corruption programme, found the survey.

More than four out of 10 now said they did business in China, Brazil, Mexico, and India, countries that were at high risk for corrupt practices in business.

More than a third of those active in China said the country posed "the greatest overall challenge to the company's operations because of the level of corruption".

And "facilitation payments", better known perhaps as bribes or "grease money", were one of the biggest headaches when it came to tackling corruption.

Often used to accelerate the performance of a contract or smooth the path through state or other bureaucracy, such payments were a complex corruption problem for which policy solutions were difficult to formulate, implement, and monitor.

By definition, any company, whether or not it had a formal anti-corruption program, had to have a facilitation payment policy.

In recent years, the trend had been for companies to become more restrictive in the policies that allowed employees to make these payments, the survey found.

More companies were also finding hotlines or helplines to be effective (40 per cent against 18 per cent in 2000).

Yet 11 of the companies polled also felt whistleblowing was an ineffective anti-corruption measure.