Can companies adopt a single global anti-corruption policy?

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Commentary:

Adopt “Stop Corruption, it’s Evil” Global Policy

Corruption is modern day slavery that must be condemned by every self respecting government or company executive

How far is it feasible to apply a global compliance policy in widely differing regional markets? And to what extent should there be local policy exceptions?

In Control Risks’ 2017 International Business Attitudes to Compliance survey, a majority of respondents (55 percent) say that their global compliance policy applies worldwide, without any local exceptions. Just over half of U.S. companies surveyed (51 percent) take this stance, compared with 56 percent from Germany, 57 percent from Brazil, 63 percent from the UK, and 67 percent from France.

However, a substantial minority of companies said that their company policies did have local exceptions in three key areas. These are “gift-giving,” chosen by 40 percent of respondents. This is followed by “permitted interactions with government employees or agents” (30 percent), and “the use of facilitation payments” (20 percent) – All that is CORRUPTION without exception.

The survey does not go into detail on the nature of these exceptions. However, in many cases the purpose of local variations may be to reinforce the company’s international position rather than to relax it. As one respondent puts it, “Exceptions are usually used to make the controls tighter than the global ones used by our parent company.”

This is a point that applies particularly to gifts, hospitality and entertainment. Company policies often apply financial limits for the kinds of gifts or hospitality that are acceptable. It is understandable that those thresholds should be lower in less prosperous developing countries.

The sheer thought that public officials should receive gifts and be entertained by foreign companies when transacting business on behalf of government or business concerns from which they draw monthly or contractual payments is a basis of promoting global corruption. Those are gifts, when in cash on inflated prices for products and services, encourage Third World civil servants to open off-shore accounts that deprive their countries development finances.

Given the many legal prohibitions, it is surprising that as many as 30 percent of respondents say they have local exceptions for interactions with government employees. Again, these may provide for a tightening of the global policy in response to local conditions rather than the reverse. Whatever happens, company interactions with government officials need to be tightly monitored and any form of material favours denied.

The third issue — demands for facilitation payments — continues to present particular difficulties in many emerging markets. One might therefore expect that a large proportion of US companies would take advantage of the FCPA provision that excludes these payments from the criminal offense of foreign bribery. However, it turns out that only 19 percent of the U.S. companies we surveyed incorporate this exception into their policies, slightly less than the global average.

The figure for the UK is notable for a different reason: 17 percent of companies report that they have local exceptions for facilitation payments. This is lower than the U.S., but one might expect UK companies to take an even stronger line given that there is no exception for such payments in the UK Bribery Act.

In Control Risks’ view, any exceptions should be regarded as a temporary expedient, and subject to tight controls, with the medium-term objective of abolishing such payments altogether. If written into policy, facilitation payment exceptions undermine the company’s overall commitment to anti-corruption.

This takes us back to the original question: is it really possible to apply a single global policy in varied international markets? In our view, YES and there is no need for conflict. Global policies should be founded on anti-corruption principles that are universal. Equally, their implementation needs to be intensely local, informed by careful risk assessment, tailored operational procedures, and targeted training.

There is no doubt that corruption is universally regarded as evil by large populations that suffer when it trickles down as poverty because they are denies essential public services by their governments.

What is Corruption?

Corruption is the process of mental corrosion that causes individuals to selfishly collude against the general good for personal gain. No one is born corrupt, it’s a personal choice driven by greed for personal benefit.

Corruption is therefore, individual abuse of public or private office for personal gain. It includes acts of bribery, embezzlement, nepotism or state capture. It is often associated with and reinforced by other illegal practices, such as tenders convolution, fraud that lead to money laundering.

Time is ripe for governments and private corporations to adopt one simple corporate policy that they “Stop Corruption, it’s Evil”. Corruption is modern day slavery that must be condemned by every self respecting government or company executive. A guiding principle is simple – No one is born corrupt, it’s a personal choice.

Corruption increases the cost of doing business

  • First, bribes and drawn-out negotiations to bargain them add additional costs to a transaction.
  • Second, corruption brings with it the risk of prosecution, important penalties, and blacklisting and reputational damage to individuals and corporates.
  • Third, engaging in bribery creates business uncertainty, as such behaviour does not necessarily guarantee business to a company; there can always be another competing company willing to offer a higher bribe to tilt the business in its favour.
  • On the macro level, corruption distorts market mechanisms, like fair competition and deters domestic and foreign investments, thus stifling growth and future business opportunities for all stakeholders. IMF research has shown that investment in corrupt countries is almost 5% less than in countries that are relatively corruption-free.

No government or company is corrupt or capable of being corrupt as an institution, individuals within those institutions are the ones who engage in corruption. It should be government or company policy that officials promoting actions that translate into corruption be held to account and never hide behind corporate images. In essence governments and corporate bodies should not be branded as corrupt on behalf of individuals driven by insatiable greed for self-aggrandizement – whether they are presidents or chief executives.

When problems arise, they rarely have anything to do with policy. Rather, they are caused — or reinforced — by failures of communication between regional offices and their headquarters, and a lack of realism about the scale of the challenges that they face.

Government and Companies that are serious and willing to curb global corruption should undertake to Stop Corruption because it is an evil way of taking advantage over competitors, self-enriching or simply conspiracy to breach the law.  The worst part is that corruption, to quote Pope Francis, is as addictive as drugs. The takers and givers progressively get addicted and their greed demands higher quantities as time goes by with the potential of blackmail eventually.

Incorrigible greed leads to greater demands for bribes and greater urge to squander the ill-gotten fortunes on excessive luxuries. Corruption seekers waste valuable money that can transform the lives of fellow citizens and their motherland on expensive fuel guzzlers for personal pleasure. Nigerians have recently been shocked to see photographs of exotic cars hidden from the glare of public eye as they are progressively covered in forest overgrowth.

How can any government or company in the western civilization justify such waste in the name of business promotion? Corruption is a moral issue whose cure should be directed to individuals directly not through business deals and inter-government negotiations.

Corruption leads to waste or the inefficient use of public resources

  • As a result of corruption, investments are not allocated to sectors and programmes which present the best value for money or where needs are highest, but to those which offer the best prospects for personal enrichment of corrupt politicians.
  • Thus resources go into big infrastructure projects or military procurement where kickbacks are high, to the detriment of sectors like education, health care and agriculture.
  • Moreover, public tenders are assigned to the highest bribe payer, neglecting better qualified companies not willing to bribe, which undermines the quality of the projects carried out.
  • In some instances public funds are simply diverted from their intended use, embezzled and exploited for private enrichment.
  • Corruption also slows down bureaucratic processes, as inefficient bureaucracies offer more leverage for corrupt public officials: the longer the queue for a service, the higher the incentive for citizens to bribe to get what they want.
  • Finally, nepotism – in both private and public organisations – brings incompetent people into power, weakening performance and governance.
  • Several studies provide evidence of the negative correlation between corruption and the quality of government investments, services and regulations. Corruption during Daniel arap Moi rule in Kenya manifested itself in white elephant public incomplete projects all over the country as well as the collapse of many other so-called Nyayo projects.

Studies have shown child mortality rates in countries with high levels of corruption are about one third higher than in countries with low corruption, infant mortality rates are almost twice as high and student dropout rates are five times as high.

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