Building a Culture of Compliance Key in Senior Management Commitment to Widespread Anti-Corruption
Ronald E. Berenbeim
The Conference Board and the Ethics and Compliance Officers' Association, November 2006
Available
online (fee)
The commitment of senior corporate management leadership and personal convictions are the most important drivers in company decisions to strengthen anti-corruption programs, according to a report released today by The Conference Board. The report is based on a mid-2006 survey of 165 multinational companies conducted by The Conference Board in collaboration with the Ethics and Compliance Officer Association (ECOA).
Thirty three percent of those surveyed say senior management leadership and conviction is the single most important factor in their company's decision to develop an anti-corruption program.
Companies now, as in a similar 2000 survey by The Conference Board, seldom cite a bottom-line rationale for anti-corruption programs. Instead, they cite legal (e.g., General home country prohibitions were picked as the single most important factor by 27 percent of the participating companies while 7 percent accorded Sarbanes-Oxley Section 404 (2002) this designation) or ethical (bribery is wrong – 13 percent) considerations as justifications for investing in anti-corruption initiatives.
Significantly more respondents (two-thirds) say that their company has a formal anti-corruption program in the current survey than in the 2000 survey (half). Company anti-corruption statements are also more detailed and precise than they have been in the past. For example, descriptions and labeling of corrupt practices and discussion of structures and procedures that support the company's anti-corruption policy are today much more common than six years ago.
Anti-corruption programs are subject to high levels of review. More than three- quarters of the survey participants report or, in some cases, have dual reporting relationships to a C-Suite executive, board member or board committee.
Chief legal officers are much more likely to be involved in all phases of the program (development, implementation, monitoring) than they were in the past. In addition, companies are now more likely to seek outside assistance in some aspect of their anti-corruption program. Nearly one-third (32 percent) used outside counsel compared to the 21 percent that did so in 2000, and 18 percent used a consultant. The 2000 survey did not ask if companies used consultants.
More than 40 percent of the survey participants do business in China, Brazil, Mexico, and India, countries that are at high risk for corrupt practices in business. According to 36 percent of the companies active in China, that country poses "the greatest overall challenge to the company's operations because of the level of corruption."
Facilitation payments (a fee paid to an individual who performs no necessary services) may be the most vexatious anti-corruption policy issue. Sometimes called "grease money" for accelerating the performance of a contract, facilitation payments are a complex corruption problem for which policy solutions are difficult to formulate, implement, and monitor. By definition, any company, whether or not it has a formal anti-corruption program, has a facilitation payment policy. Even no policy is a policy of sorts.
In recent years, the trend has been for companies to become more restrictive in the policies that allow employees to make these payments. In 2000, 19 percent of the surveyed companies said that within the last three years their policy has become more restrictive. In 2006, 27 companies moved in this direction.
The most common reason given for the institution of more restrictive facilitation policies was the company's involvement in some kind of global anti-bribery network such as Transparency International or the International Chamber of Commerce.
Significantly more companies now say that hotlines or helplines can be effective (40 percent compared with 18 percent in 2000). But the highest number of companies (11) cited whistleblowing programs as the anti-corruption measure that was ineffective.
Other than Internet posting, company sharing of information regarding anti-corruption programs and disclosure of corrupt practices (even in sustainability reports) are rare.